September 26, 2005

Merkel sets conditions for talks with Schroeder

By Noah Barkin

BERLIN (Reuters) - German conservative leader Angela Merkel
said on Monday she could not recommend entering full coalition
talks with the Social Democrats (SPD) until they recognized her
as the country's rightful chancellor.

Speaking after a meeting of her Christian Democrats (CDU)
in Berlin, she laid out conditions for talks to break the
deadlock that has plagued Germany since Sunday's inconclusive

Merkel, 51, told reporters these include "a recognition
from them (the SPD) that the conservatives are the top party
and have responsibility for naming the chancellor."

In an unprecedented move Chancellor Gerhard Schroeder,
whose party was narrowly beaten by the conservatives, has
insisted on remaining in office -- an objective that SPD
General Secretary Klaus Uwe Benneter reiterated shortly after
Merkel spoke.

"We are going into talks with the goal of governing with
Schroeder at the top and the aim of pushing through as much of
our program as possible," Benneter said.

Since neither the CDU nor the SPD won a parliamentary
majority with their allies, they have been forced into talks
with each other on forming a so-called "grand coalition" -- an
alliance that has not existed in Germany since the 1960s.

The central hurdle to those talks is agreement on who will
lead the next government.


The rival parties met last Thursday and are due to talk
again on Wednesday, but both sides are describing the
discussions as "exploratory" rather than full-blown coalition
negotiations for now.

Before serious talks can proceed, Merkel said her party
wanted to reach a consensus with the SPD on which German
problems needed to be addressed and get assurances the SPD was
prepared to implement policies that would "renew" Germany.

"In my view, these are the areas that in the exploratory
talks must be agreed in order for me to recommend coalition
discussions," Merkel added.

Schroeder, 61, said on Sunday that he supported a coalition
with Merkel's party, but insisted that talks proceed on policy
issues before the leadership question is broached.

However, pressure is mounting on Schroeder to drop his
insistence on staying in office as warnings mount over the
deadlock's impact on a sluggish economy.

Just over a week ago, financial markets had been hoping
Merkel would sweep into office with her Free Democrat (FDP)
allies and implement far-reaching reforms of the labor market
and tax system to spur growth, the weakest in the 25-nation
European Union.

But the tight election and its uncertain aftermath has
dashed those hopes and led to warnings from central bankers and
ratings agencies.

The German media is also getting into the act. In an
editorial on Monday, the Financial Times Deutschland called
Schroeder's stance unpatriotic and urged him to drop his

"The Chancellor is preventing a rapid coalition agreement
between the country's large parties by absurdly clinging to
power," the FTD said. "This stance is irresponsible because it
prolongs the period of uncertainty."