By Holger Hansen
BERLIN (Reuters) - Germany's Social Democrats (SPD) will not agree to a "grand coalition" with Chancellor Angela Merkel's conservatives without agreement on core issues including labor market reforms and expanding dual citizenship, its leader said.
The SPD got the green light from party members two weeks ago to start coalition talks after it pledged not to budge on 10 "non-negotiable" demands, also including infrastructure investment and equal pay.
The conservative bloc, made up of the Christian Democrats (CDU) and their Bavarian allies, the Christian Social Union (CSU), emerged as the strongest force in a September election but is still short of enough seats to rule alone.
In comments to the SPD party's Berlin branch on Saturday, Gabriel made clear they could still reject a 'grand coalition'.
"If we have good reasons, we can ultimately say no and accept new elections," Gabriel said in a speech.
"If, for example, they say no to dual citizenship and re-regulating the labor market, those are good reasons to say at the end: No, we won't do it."
Children of migrants who are born in Germany are allowed to keep both their German nationality and that of their parents until they turn 18, when they have to choose between the two.
But there are exceptions, including for people from the European Union and Switzerland. The previous German government in June blocked legislation to change the system, which supporters say would help alleviate a skilled labor shortage.
Some members of the SPD have accused the conservatives of anti-Turkish sentiment verging on racism in rejecting the bills, which would have had the most effect on German residents of Turkish origin.
The party also wants to introduce a blanket minimum wage of 8.50 euros per hour, as opposed to the current system of agreeing wages in collective bargaining by sector and region.
Germany has resisted the measure in part because it is seen as political interference in bargaining between unions and employers.
This week a working group set up as part of the coalition negotiations made progress towards introducing a wage floor in more sectors but did not agree on a universal wage.
The two sides want to wrap up negotiations by November 26, after which the SPD plans to allow its 472,000 members to vote on the deal in an unprecedented move that could complicate or even doom whatever is agreed.
Many SPD members are wary of another alliance with Merkel after voters punished the party following its 2005-2009 coalition with its worst election result since World War Two.
The result of the full-party vote is due on December 15. If the deal goes through, the government could start work the next week.
(Writing by Michelle Martin; Editing by Sonya Hepinstall)