The CDU-CSU alliance opposed the full tax cut on the grounds that Germany could not afford it.
Economy Minister Karl-Theodor zu Guttenberg, from Mrs Merkel's conservative CDU-CSU alliance, criticised the pledges, saying they were short of detail.
This was the fate of Ludwig Erhard in 1966, when an earlier coalition of CDU, CSU and FDP abandoned him.
"We have decided - the CDU-CSU faction in the Bundestag - that there would be no more expansion at all, " he told BBC Radio 4's World at One programme.
After the constitutional court overturned a law in March that required telecoms and internet firms to make records available to police, the CDU and CSU clamoured for a robust replacement.
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The 18 September elections left neither the centre-left SPD nor the conservative CDU and its Bavarian sister party, the CSU, with a majority in the Bundestag, the lower house of parliament.
The CDU's Bavarian sister party, the Christian Social Union (CSU), objected to her idea to have everyone pay the same premiums, on the grounds that it was socially unjust and would anyway be a hard sell, and little is left of the original plan.
She comes from the Christian Social Union (CSU), the Bavarian wing of the Christian Democratic Union (CDU).
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Mr Guttenberg is a member of the Christian Social Union (CSU), the Bavarian sister party of Chancellor Angela Merkel's conservative Christian Democrats (CDU).
Mr Guttenberg, a member of the Christian Social Union (CSU) - the Bavarian sister party of Mrs Merkel's conservative Christian Democrats (CDU) - was also stripped of his PhD by the University of Bayreuth last year after evidence of his plagiarism emerged.
The parties' combined membership (excluding the CSU's) has dropped from 1.7m in the 1970s to 1m, with the CDU surpassing the SPD for the first time last year.
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