Merkel poised to form coalition with Schroeder

GERMANY’S two biggest parties edged closer to a ‘grand coalition’ yesterday, as conservative leader Angela Merkel said there was a very strong chance the conservatives and Social Democrats would form a government.

After meeting the leader of the liberal Free Democrats (FDP), once her preferred coalition partners, Merkel said her Christian Democrats (CDU) were much more likely to forge a coalition with Chancellor Gerhard Schroeder’s Social Democrats (SPD).

“The possibility or likelihood of a coalition with the SPD is much higher than the other constellations,” Ms Merkel told reporters, adding there was a “very high probability” of success.

Markets have slowly been warming to the prospect of a grand coalition. The stock index has risen to 3½ year highs after an initial post-election drop.

Economists say the advantage of the grand coalition is it could push through reform of the cumbersome federal system, implement tax reform and put German finances in order.

FDP chief Guido Westerwelle said he had not given up hope for some kind of coalition with the CDU and its sister party, the Christian Social Union (CSU). But he acknowledged that the chances of an SPD-CDU/CSU government were much greater. “It seems in all probability that we’re heading for a grand coalition,” Westerwelle told reporters.

In recent days, both Ms Merkel and Mr Schroeder have dropped their pre-election reservations about a grand coalition, expressing optimism that they will agree on a power-sharing arrangement. Ms Merkel did not mention the issue of who would be chancellor in a grand coalition, which is expected to be a major sticking point in any formal coalition talks between the CDU/CSU and SPD.

Both Ms Merkel and Mr Schroeder have claimed the right to be the next chancellor but declined to comment in detail on the issue after informal exploratory talks on Wednesday. The CDU/CSU just barely came out ahead in the September 18 election, gathering 35.2% of the vote versus 34.3% for the SPD, 9.8% for the FDP and 8.1% for the Greens.

Mr Westerelle said it was time for Mr Schroeder, who presided over a coalition with the Greens for seven years, to step aside. “It would be right and appropriate to recognise it’s not about him or his personal career, but that it is about the fate of our country.

“He should not stand in the way of ... a new beginning any longer,” he said.

Germany’s Economy Minister Wolfgang Clement denied that Schroeder wanted to remain chancellor for selfish reasons.