By Andreas Rinke and Markus Wacket

BERLIN (Reuters) - Germany's conservatives and Social Democrats (SPD) agreed on Wednesday to go into the next round of negotiations on forming a coalition government despite deep differences remaining on areas from immigration to consumer protection and criminal justice.

Sector specialists from Friedrich Merz's conservatives, who won the February 23 national election, and the third-placed SPD have spent the past two weeks thrashing out draft governing programmes in 16 different areas.

"We share the goal of laying the foundations for a strong, capable government," the parties said in a statement announcing that party leaderships would from Friday begin the work of settling on a final document.

With Donald Trump's return to the White House, Russia's war against Ukraine and a flagging economy presenting Germany with its deepest economic and diplomatic crises in a generation, the work is urgent: Merz, would-be chancellor, has said he hopes to form a government by the end of April.

In key areas, the parties remain far apart, such as on immigration, where the SPD is reluctant to countenance expulsion of illegal migrants at the borders, a key conservative demand.

The broad thrust of fiscal policy was already laid out by the parties of the outgoing parliament last week when they agreed to authorise borrowing of up to a trillion euros to beef up military and infrastructure spending.

The SPD, who led Olaf Scholz's outgoing government, are in a strong position despite their poor electoral performance, since they are the only party other than the far-right Alternative for Germany (AfD) who can provide Merz with a governing majority.

The AfD, now the second-largest party in parliament, are creeping up in polls, with some conservative voters seemingly dismayed by Merz's about-turn on large-scale borrowing, something he said would not be needed during the campaign.

Immigration controls are a key demand for Merz, who sees them as the means by which voters can be won back from the AfD.

The parties' drafts also agree on the need for greatly expanded police and intelligence surveillance powers in response to a series of deadly attacks. Police have long blamed Germany's strict privacy laws for making it hard to prevent attacks such as December's deadly car-ramming rampage in Magdeburg.

(Writing by Thomas Escritt; Editing by Alexandra Hudson)