October 5, 2005

Merkel, Schroeder camps meet, exchange threats

By Noah Barkin

BERLIN (Reuters) - Germany's conservatives and Social
Democrats met on Wednesday for talks on forming a new
government, but both sides threatened to break off discussions
unless the other backed down over who should run the country.

Before the exploratory talks began at 2 p.m. (1200 GMT),
allies of conservative leader Angela Merkel reiterated that no
serious coalition negotiations could take place unless
Chancellor Gerhard Schroeder agreed to step aside.

"If it doesn't happen, we'll simply have to interrupt the
talks," said Dieter Althaus, Christian Democrat (CDU) premier
of Thuringia.

Although Merkel's CDU and its sister party, the Christian
Social Union (CSU), won four more parliamentary seats than the
SPD in the September 18 election, neither main party won enough
votes to form a government with its allies, and Schroeder has
refused to relinquish power.

With an eye to public opinion, Schroeder did pledge in a
television interview on Monday not to stand in the way of a
so-called "grand coalition."

But his party appears to believe that by keeping him around
it can extract more concessions from the conservatives in their

"If the Union puts conditions on the talks then they will
be over very quickly, and then there will be a pause until the
Union has returned to its senses," SPD deputy parliamentary
group leader Ludwig Stiegler told n-tv television.

Policy issues including the budget and healthcare are on
the agenda for Wednesday's meeting, but the CDU may demand a
gesture from Schroeder before moving to the substance of the


At this stage, the warnings appear to be posturing rather
than serious threats that could doom the talks and prospects
for Germany's first grand coalition since the 1960s.

Coalition negotiations are expected to drag out into
November as both sides maneuver to influence policy and win
cherished ministerial posts.

But both Schroeder and Merkel must keep a close eye on
public opinion to ensure it doesn't start moving against them.

A poll released by the Forsa institute on Wednesday showed
34 percent of Germans support Merkel as leader of a grand
coalition, up from 29 percent a week earlier, while 26 percent
back Schroeder and 22 percent would prefer someone else.

SPD chief Franz Muentefering has said his party wants to be
recognized as an "equal" in the discussions and push through as
much of its own election program as possible.

Schroeder's party is expected to press Merkel to abandon
her plans to ease firing rules, cut payroll costs and change
the way unions negotiate contracts across entire industries.

The parties have signaled agreement in a series of other
areas, including reforms to the cumbersome federal system,
changes to the tax code and budget policy. That has boosted
German stocks, which fell initially on the election result.

But the posturing has worried German industry and some
politicians, who fear a grand coalition could fail to live up
to the challenges facing it.

Friedrich Merz, a senior CDU finance expert who has clashed
with Merkel in the past, said on Wednesday there was no room
for delay in attacking Germany's economic woes.

"If a new government is not able to act quickly on the
problem of unemployment, then one should hope from the very
start that it does not last long," he said in a statement.