German leaders mull next move

2005-09-19 14:06

Berlin - Germany's political leaders on Monday began the tortuous process of trying to form a new government after an inconclusive election that left Angela Merkel's conservative party well short of a clear mandate to deepen economic reform.

Both Merkel and chancellor Gerhard Schroeder claim the right to head the next government, although the election left Schroeder's outgoing government of Social Democrats and Greens without a majority in parliament, and Merkel's preferred combination of her Christian Democrats and the pro-business Free Democrats also fell short.

As Germany's benchmark stock market opened down nearly 2%, reflecting the unclear result of parliamentary elections, leaders of the main parties gathered in Berlin to plan their next move.

Merkel's party in the lead

Official results showed Merkel's party winning 225 seats, three more than the Social Democrats. The Free Democrats got 61, the Greens 51 and the new Left Party, an alliance of ex-communists and former Social Democrats alienated by Schroeder's efforts to trim the welfare state, 54.

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

Merkel underlined her claim to become Germany's first female chancellor, saying "we have the strongest group in parliament and, with that, a clear mandate to form the government".

A "grand coalition" of the two main parties appeared a likely outcome. However, Volker Kauder, general secretary of Merkel's conservative party, said it also would seek talks with the Greens on a three-way combination that would include the Free Democrats - winning a cool initial reaction.

Watered down plans

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 membership in the European Union also is up in the air.

German share prices dropped following Merkel's failure to gain a clear mandate to deepen reform of Europe's biggest economy, which suffers from an unemployment rate of 11.4%. Frankfurt's DAX index of blue-chip stocks was down nearly 2% at 4 887.55 in early trading.

Both Merkel and Schroeder said on Sunday night they would seek talks with every other party except the Left Party.

An exuberant Schroeder, who described the conservatives' result as "disastrous", taunted Merkel in a joint television appearance, saying she would not receive the post of chancellor in any deal with the Social Democrats.

If the new parliament cannot elect a chancellor in three attempts, President Horst Koehler could appoint a minority government led by the candidate with a simple majority.

- AP