Germany slides into political chaos

GERMANY slid into political chaos yesterday after an inconclusive election left chancellor Gerhard Schroeder and his challenger Angela Merkel wrestling for the right to form a new government.

Conservative leader Merkel and Social Democrat Schroeder said yesterday both begun contact with potential coalition partners.

Merkel urged her rival's party to "accept that they are not the strongest party" after Sunday's election and enter talks on a broad right-left alliance under her leadership. But within minutes, the chairman of the Social Democrats, Franz Muentefering, said he had written to other party leaders to invite them to hold talks on a new coalition.

"I have initiated contact with the offices" of the other parties, Merkel said.

She added that she, like Schroeder, would refuse to hold talks with the Left Party.

Muentefering said any link-up between his party and Merkel's would be without Merkel as chancellor.

Voters denied a majority to both Schroeder's outgoing government of Social Democrats and Greens and Merkel's preferred combination of her Christian Democrats and the pro-business Free Democrats.

As Germany's benchmark stock market and the euro dropped amid gloom over the muddled outcome, leaders of the main parties met in Berlin.

The official results were based on counting from 298 of 299 districts; voting in the final district, in the eastern city of Dresden, has been delayed until October 2 because of a candidate's death.

Schroeder refused to back off his claim to form a new coalition, saying that his party "has made clear its will to lead this country in government."

"I do not rule out anybody revising their position," Merkel said of Schroeder.

A "grand coalition" of the two main parties appeared a likely outcome.

However, conservative leaders said they also would seek talks with the Greens on a three-way combination that would include the Free Democrats winning a cool initial reaction.

Merkel likely will have to water down plans to shake up Germany's labour market and reform its tax system to gain a majority with a party to her left. To woo the Greens, she likely would have to soften plans to halt the outgoing government's program of shutting down nuclear power plants. Her opposition to Turkish EU membership also is up in the air.

Schroeder said Merkel would not receive the post of chancellor in any deal with the Social Democrats.

With the Left Party ruled out as a partner, Schroeder's only option besides a "grand coalition" would be a combination of Social Democrats, Greens and Free Democrats a possibility the latter immediately rejected.

If the new parliament is not able to elect a chancellor in three tries, President Horst Koehler could appoint a minority government led by the candidate with a simple majority.