World Bulletin / News Desk

Germany's divided Social Democrats hold a crunch vote Sunday on whether to pursue a coalition deal with Chancellor Angela Merkel's conservatives, or plunge Europe's top economy into political turmoil.

The stakes could scarcely be higher for Merkel as a "no" vote would leave her with the option of leading an unstable minority government -- a prospect she has baulked at -- or face snap polls.

The fate of SPD chief Martin Schulz also hangs in the balance, with pundits predicting he would have to step down should he fail to secure the party's backing for another grand coalition.

Europe is watching closely, hoping for an end to months of political deadlock in a pivotal member state just when French President Emmanuel Macron needs Berlin's backing to push through ambitious EU reforms.

"Today is one of those days where there is much at stake for the SPD, the nation and Europe," Schulz tweeted. "May the better arguments prevail."

Schulz is due to address the party conference at 1030 GMT.

The vote outcome is far from certain after leading SPD members savaged a coalition blueprint painstakingly thrashed out by the three parties this month, complaining it contained too many concessions on issues such as migration, taxes and healthcare.