"The Liberals are a completely wretched horde," is how one German politician recently described the Free Democrats (FDP) in a conversation with SPIEGEL. Strong words, to be sure, but hardly out of the ordinary in the occasionally rough-and-tumble day-to-day in the Berlin halls of power.

Usually, though, such attacks on a governing party come from members of Germany's ribald opposition. Not this time though. The statement was made by a leading member of Angela Merkel's conservatives, partners with the FDP in the chancellor's increasingly fractious governing coalition.

So far in the new year, such statements have been far from the exception. Merkel's second term in office is not even 100 days old, but any illusion of unity among the coalition parties has long since evaporated. Indeed, the child-like bickering between Guido Westerwelle, head of the FDP and Germany's new foreign minister, and Horst Seehofer, who leads the Christian Social Union (CSU) -- the Bavarian sister party to Merkel's Christian Democrats -- has become so intense that Merkel has finally seen fit to break her accustomed silence in the face of controversy and call for a coalition summit at the Chancellery for later this month.

Reaching for the Volume Knob

But it is unclear whether such a meeting will be able to completely set aside differences within Merkel's coalition. Despite all sides having signed a coalition agreement not long after general elections at the end of last September, deep division has become Berlin's hallmark -- disagreement that has consistently found its way onto the front pages of German newspapers in recent weeks.

On Wednesday, both the FDP and the CSU sought to turn down the volume knob on the shouting match. At an annual party-leadership meeting in Stuttgart, FDP head Westerwelle tried to look beyond the spat and call attention to the coalition's long-term goals, saying "we didn't take office with the intent of leaving after four years." In Bavaria, at a CSU party convention, Seehofer said it is time to set aside personal differences "for the good of the whole."

Still, no matter how collegial the CSU and the FDP may be in public, the central issues in their dispute remain. Indeed, the primary issue is one that the Merkel government has made a centerpiece of its second term: tax cuts. The FDP has staked its reputation on the desire to radically reform Germany's tax system with the goal of passing tax cuts in the next three years worth €24 billion -- in addition to the €8 billion in tax reductions just passed in December.

The problem, though, is that nobody has yet come up with a way to pay for the massive package of cuts. With the German economy not expected to show more than modest growth in coming years, tax revenues won't likely be enough to counteract the cuts. And a new, balanced-budget amendment to the German constitution, which will be phased in starting in 2011, makes taking on new debt decidedly risky.

Conforming to Reality

That hasn't stopped the FDP from pressing the issue, however. The business-friendly party spent much of its campaign promising significant tax cuts and has interpreted the ensuing coalition agreement as a promise of tax reform. But the CSU is adamantly opposed. Despite his attempts at tranquillity on Wednesday, Seehofer couldn't resist yet another barb at Westerwelle's expense.

"I can only advise those with political responsibility -- those in government -- to remember that they have to conform to reality," he told reporters on the sidelines of the CSU convention. "One can't design a budgetary policy that is completely unmoored from tax revenue and economic growth indicators."

Economic experts in Germany argue that Seehofer is right. The German Institute for Economic Research (DIW) said on Thursday that the Merkel government's aim to cut taxes is in direct conflict with economic realities and with the balanced budget amendment. The DIW warns that, even without tax relief, Berlin will have to take on a total of €240 billion in new debt in 2010 and 2011. Numerous other top economists have likewise warned Berlin against adding to the country's already massive public debt, which has increased sharply as a result of the global economic downturn.

Down from the Trees

An article in the Leipziger Volkszeitung on Thursday suggests that Westerwelle may already have lost the battle. The paper writes that Merkel and Seehofer agreed over the holidays that no more significant tax cuts are in the offing. "Mr. Westerwelle has to bring his FDP back down to Earth," the paper quotes an unnamed CSU politician as saying.

But taxes haven't been the only source of difficulty for Merkel's coalition. December's scandal regarding suspected duplicity in Berlin in connection with a German-ordered bombing in Afghanistan , which cost the lives of dozens of civilians, has also cast a shadow of incompetence over the government.

Furthermore, the FDP and the CSU continue to be at odds when it comes to continuing efforts to establish a museum in Berlin dedicated to those Germans expelled from Poland and the Czech Republic following World War II . Particularly problematic is the efforts of the foundation behind the project, the Federation of Expellees (BdV), to place its president, parliamentarian Erika Steinbach, on the museum's board.

The issue is particularly sticky given fears in Poland that Germans, by establishing the expellee documentation center, are attempting to recast themselves as victims of World War II. Westerwelle of the FDP, who is also Merkel's new foreign minister, has pledged to block efforts to seat Steinbach on the museum board, out of respect for German-Polish relations. The CSU, on the other hand, has long seen itself as the political voice of the expellees and has warned Westerwelle to give way.

Scarier than Ahmadinejad

On Wednesday, Polish Foreign Minister Radoslaw Sikorski said he welcomed efforts in Berlin to make "good relations with Poland" a top priority. Last autumn, a survey found that Steinbach is the second-most feared politician in Poland, behind Russian Prime Minister Vladimir Putin -- but ahead of Iranian President Mahmoud Ahmadinejad.

The tiff flared earlier this week when the Federation of Expellees offered to compromise, prompting the CSU to insist that the FDP accept. But given the laundry list of conditions attached to Steinbach's peace offering, Westerwelle has stayed firm.

It seems unlikely that the conflict between Merkel's two junior partners will disappear any time soon, even if the chancellor does finally call the two parties to order. The FDP spent 11 years in opposition before finally achieving a record vote total of 14.6 percent in last September's elections. Indeed, Merkel would likely have had to forge yet another coalition with the center-left Social Democrats had the FDP not bailed her out. With over twice as many seats in German parliament as the CSU, Westerwelle won't be in the mood to back down.

Seehofer's CSU has its own reasons for wanting to raise its profile. The party has not fared well in recent elections in Bavaria following years of dominance. Furthermore, the party's hard-won reputation for economic competence took a huge hit in December after the Bavarian state bank Bayern LB lost €3.7 billion in shedding itself of its teetering Austrian affiliate Hypo Group Alpe Adria. Seehofer has rapidly transformed himself into a fiscal conservative and is doing everything in his power to be seen as the voice of reason.