Germany's conservative opposition threatened on Saturday to block government reforms to the way pensions and life insurance policies are taxed.
"We will reject the coalition's proposal in the Bundestag (lower house) next week and also won't look for mediation in the Bundesrat (upper house)," Volker Kauder, the conservative parties' parliamentary whip, told Berliner Zeitung newspaper.
The government's reforms are designed to bring Germany's tax system into line with a ruling by the country's constitutional court that differences in the tax treatment of pensions of former civil servants and normal employees was unfair.
The reforms are designed to progressively move to a system of tax free contributions and taxed pension benefits.
The opposition conservative Christian Democratic Union (CDU) and Christian Social Union (CSU) parties have a majority in the Bundesrat, which has joint say with the lower house over most tax issues.
Government officials have warned of a constitutional crisis if no changes are agreed by January 1, 2005, the deadline set by the court for compliance with the ruling, and still hope a deal can be struck by then.
The proposals originally foresaw scrapping tax breaks on contributions made to life insurance policies taken out after the new law comes into effect, but there have been reports this could be dropped.
The government's proposals also foresee simplifying regulations governing so-called "Riester" private pensions, launched in 2002 to provide individuals an alternative way of saving for their retirement as state entitlements are trimmed.