Schroeder, Merkel in crucial talks

Chancellor Gerhard Schroeder and conservative leader Angela Merkel began talks yesterday to try to resolve a bitter row over who should lead Germany and lay the foundations of a coalition government of their rival parties.

But Franz Muentefering, chairman of Schroeder's Social Democrats (SPD), attending the talks along with Christian Social Union (CSU) leader and Merkel ally Edmund Stoiber, said the two sides were not to announce a deal yet.

"We won't know until midday tomorrow whether we can move to full coalition talks," Mr Muentefering said at a trades union event in Hanover.

An SPD spokesman said earlier a further meeting of the four party heavyweights was planned for Monday at 11 a.m.

Three weeks after an election which gave neither Ms Merkel's Christian Democrats (CDU) nor Mr Schroeder's SPD enough votes to rule with their allies, analysts predict they will eventually strike a deal vaulting Ms Merkel into the chancellery and giving the SPD key ministerial posts.

A deal over who leads Germany would open the door to detailed coalition talks that are likely to drag into November.

"I believe that with goodwill on the part of all participants we can get a solution and a result," Guenther Oettinger, CDU premier of the state of Baden-Wuerttemberg, said.