BERLIN, June 26 (Reuters) - Below are highlights from a draft election programme of Chancellor Angela Merkel's Christian Democrats (CDU) and their sister party, the Bavarian Christian Social Union (CSU). The parties are due to approve the programme on Sunday.
TAXES
* CDU/CSU reject tax increases and call for reforms to limit the impact of "cold progression" -- the process by which taxpayers are shifted into higher tax brackets even if their real incomes have not grown.
* The CDU/CSU call for a two-step cut in the lowest income tax bracket to 12 percent from 14 percent. They want to raise the threshold above which income is taxed at Germany's highest rate of 42 percent to 60,000 euros ($83,600) from 52,552 euros.
* CDU/CSU say they will "examine" corporate taxes to ensure they do not over-burden firms.
* They would use any additional financial wiggle room to lower taxes, but give no specifics.
GOVERNMENT FINANCES/MARKETS
* CDU/CSU say a solid currency and budget are the foundation of a sound economy. They say Europe needs the Stability and Growth Pact and reject attempts to exert political influence over the European Central Bank.
* Continue reform of Deutsche Bahn. Under a partial privatisation, the rail network and train stations must remain under government ownership.
* Bring German bank supervision under one roof and ensure national bodies in Europe channel through European Central Bank.
* Oversight of ratings agencies. Hedge funds should adhere to an internationally-agreed code of conduct.
* Reject protectionism and urge Doha round trade deal.
FOREIGN POLICY
* Use all opportunities to strengthen the transatlantic partnership with Washington. Launch German-American energy efficiency initiative that would help win developing-country support for post-Kyoto climate agreement.
* Good ties with Russia are in Germany's interest. Depth of ties depends on Russia meeting international obligations.
* Aim to limit risks of instability in Afghanistan spilling into Europe and Germany. Security depends on civilian reconstruction as well as military.
* After 12 new members and Croatia, EU must enter consolidation phase before considering further enlargement. Turkey does not meet criteria for membership and should be offered a "privileged partnership".
ENERGY/CLIMATE
* German energy imports should be diversified across a number of countries.
* Nuclear energy is a crucial part of a proper energy mix. Existing nuclear plants that are judged safe should have their lifespans extended. No new nuclear plants should be built.
* Back post-Kyoto climate agreement and say must agree binding climate goals with the United States and pull developing countries along.
* Back goal to cut CO2 emissions by 40 percent by 2020 compared to 1990 and to increase renewable energy to 30 percent of all electricity generation by the same date.
LABOUR MARKET
* CDU/CSU support a minimum income for all in Germany. They urge a "stabilisation" of non-wage labour costs and better security for workers who lose their jobs due to economic crisis.
* Unemployed people receiving state aid should be given more leeway to save for their retirement years.
* Boost participation of elderly citizens in the workforce and provide incentives for care service workers to ease demographic pressures.
FAMILY POLICY
* Increase government subsidies for families with children. Make subsidies for parents who take time off work for newborns more flexible, allowing them to work part-time and receive aid for up to 28 months.
* Ensure available childcare spots match demand by 2013, giving all parents guaranteed childcare for kids above one-year-old. Make kindergarten free for all over longer-term.
EDUCATION/INTEGRATION
* Obligatory language tests from the age of four and help for children with deficits. By 2010, all children entering school should speak German.
* Courses on Catholic and Protestant religions should be expanded to include other religions depending on demand as long as courses take place in German and by German-trained teachers.
* CDU/CSU reject calls for uniform immigration rules within the EU, saying member states should decide for themselves.