At the start of Chancellor Angela Merkel's reign last November, the members of her power-sharing coalition got on so well that they purred pet names at each other. Peter Struck, the grouchy, gravel-voiced chairman of the Social Democrat members of parliament, was fondly called "Strucki-Bear" by his conservative counterpart Volker Kauder, who in turn became "Kauderle", roughly translated as "Kaudiepie".

The two parties which had fought each other for almost 40 years promised to bury the hatchet, put their own interests aside and work together for the greater good of Germany. They hammered out a coalition agreement in four weeks of talks during which both claimed the working atmosphere had steadily improved. "As long as we trust each other personally, we'll make it," Merkel said at the time.

They had no alternative -- the September 2005 election had left them virtually in a dead heat. Cooperating was the only way to form a workable government.

Less than a year on, most commentators agree that the first "grand coalition" in four decades isn't working, and there's little Merkel can do about it. The government's main project so far, a reform of the health service, is unravelling months after the two parties reached a messy compromise to control spiralling health costs and make funding more transparent.

The reform has been postponed by three months from its original January 1 start date and powerful conservative state premiers are calling for major changes and openly criticizing SPD Health Minister Ulla Schmidt.

"Culture of mistrust"

SPD members in turn are flirting with the opposition liberal Free Democrats, even though they have even less in common with the pro-market, tax-cutting party than with the conservatives. A "culture of mistrust" has taken hold in the coalition, said Andrea Nahles, a leading member of the SPD's left wing.

Mutual dislike and fundamental disagreements on policy are coming out with a vengeance after being hidden for months behind a façade of harmony. Surveys show the Germans want the government to stop bickering and get on with gentle reforms that don't cause anyone too much pain.

The sniping is mainly hurting Merkel's conservatives who have slumped 12 points in the last six months to 29 percent, their lowest level since a major party funding scandal in 2000. The SPD has edged up to 30 percent.

"People have the impression that the government has done too little, and that most of its policies have taken money out of their pockets. That's not what they they wanted," said Manfred Güllner, director of the Forsa polling institute.

He said people had little hope that this government would be able to achieve much and were still worried about mass unemployment, which remains above 10 percent despite a slight decline in recent months.

Voters are getting turned off by internal disputes they see as motivated by "vanity, power politics or excessive self-interest," mass circulation daily Bild said in a Tuesday commentary. "The conservatives have indulged in too much of that. Now they're paying the price."

One of the main internal critics of the health reform, Bavarian state premier Edmund Stoiber, told a meeting of his Christian Social Union party on Monday that if compromise talks fail "it will be the end of the government."

Little hope for big reforms

Despite Stoiber's warnings, most analysts expect the grand coalition to remain intact and that some form of watered down health reform will eventually be agreed. Neither party has realistic alternative coalition partners at the moment and are therefore bound to each other. But analysts are writing off any prospects that this government will be the reforming force it pledged to be.

"There's no reason to expect that this grand coalition won't go on muddling its way through for quite some time, although it would be well advised to stop all the back-biting," said Karl-Heinz Nassmacher, political scientist at Oldenburg University. "Expectations of what it could achieve were exaggerated right from the start. These two parties have had opposite positions on key issues for decades. There are major ideological differences between them and that won't change because they're in government together."

Given that the government consists of two equally strong parties that need to show their supporters how different they are, there's a limit to what Merkel can do, said Nassmacher. "She's got to try and control her coalition partner, her own parliamentary party and the regional conservative premiers at the same time. That's not possible."

Economy slowing

The policy rifts could hurt the German economy which has only just shed its "sick man of Europe" image thanks in part to jobless benefit cuts and labor reforms pushed through under Merkel's predecessor Gerhard Schröder.

If the economy slows next year as most economists expect, Merkel's failure to carry out meaningful reforms will start to weigh on business and consumer sentiment, both still riding high after a year boosted by the World Cup and surging global demand for machines and cars made in Germany.

"We’ve done our homework more than other European countries,” said Lothar Hessler, an economist at HSBC Trinkaus, referring especially to France, where mass demonstrations halted a hire-and-fire youth jobs law this year, and Italy, where reforms have been obstructed by the lengthy change of government and by strikes. "Everyone here has realized that things can’t go on the way they did in the past,” said Hessler. But failure to agree on further big changes would spark speculation that 2006 was a one-off good year for Germany, he added.