My usual workflow with git is to create a new feature branch, do some work with frequent commits, and then merge back into the development branch when the feature is working
This doesn't answer your question directly, but you should be able to avoid the conflict in the first place.
Consider doing a
git rebase master topic
before performing the merge. The DESCTIPTION section of this page http://git-scm.com/docs/git-rebase should be helpful.This may also obviate the need for the squash as an interactive rebase would allow you to to squash commits of your choosing.
EDIT: See also: In git, what is the difference between merge --squash and rebase?