World Bulletin / News Desk

Chancellor Angela Merkel warned Friday that Germany's top parties still had "very serious differences" to overcome ahead of next week's deadline for sealing a coalition deal.

"There is still a whole range of very serious differences -- we have an enormous amount of work ahead of us," she said in reference to policies on refugees, the labour market and health insurance.

"I hope we will succeed but the problems are, as I said, not yet solved."

Germany has been in political limbo since a September 24 election in which Merkel failed to win a clear majority, in part due to the rise of the anti-immigration Alternative for Germany (AfD) which took millions of votes from all major parties.

Merkel initially turned to two smaller parties, the Free Democrats and Greens, to form a new coalition government for her fourth term. But when those talks collapsed in November, she had to once more woo a reluctant SPD for a new pact.

Both main parties reached a breakthrough deal in January when they presented an in-principle agreement to start formal coalition talks that could lead to a new government for the biggest EU economy by the end of March.