October 10, 2005

Conservative Merkel to be named German leader

By Philip Blenkinsop

BERLIN (Reuters) - German conservative leader Angela Merkel
will become the country's first woman chancellor under a deal
struck with Chancellor Gerhard Schroeder's Social Democrats
(SPD), senior sources from the leading parties said on Monday.

Under the agreement, the SPD is poised to get the foreign,
finance, justice and labor ministries in a new coalition
government with Merkel's Christian Democrats (CDU), a senior
SPD source told Reuters.

Chancellor Gerhard Schroeder, who has ruled since 1998, is
set to relinquish his grip on power and end three weeks of
deadlock since inconclusive elections last month.

Schroeder and Franz Muentefering, the chairman of his
Social Democrat party (SPD), will meet Merkel and her ally,
Christian Social Union (CSU) leader Edmund Stoiber, for a third
and probably final time at 11 a.m. (0900 GMT) on Monday.

The four left a second round of discussions shortly before
midnight on Sunday without saying a word.

The wrangling between the main forces on the left and right
comes after a general election gave neither the conservatives
nor the SPD enough votes to rule with their preferred partners.

Schroeder's SPD, despite winning four fewer seats in
parliament than the conservatives, had refused to relinquish
its hold on the Chancellery.

Schroeder's party is expected to extract key concessions
from Merkel on economic policy, resulting in a dilution of the
reform agenda she pushed during the election campaign.

The leaders are expected to hold consultative sessions with
their parties both before and after Monday's talks.


A deal over who leads Germany would open the door to
detailed coalition talks following the most inconclusive
election result in postwar German history.

The talks to forge a power-sharing coalition of the
country's two largest parties, dubbed a "grand coalition," are
likely to extend into November. It would be only the second
coalition of Germany's top two parties since World War Two.

Germany has been mired in a political limbo since the
September 18 election and economists have warned that further
delay could harm the struggling economy.

Germany's Dax index of leading shares was trading 0.8
percent higher after the reports that Merkel was to become

Financial markets are watching the talks closely to see how
much Merkel will have to dilute her reform plans to appease the
SPD and secure the chancellorship.

If Merkel makes too many concessions it could delay or
scupper changes which economists say Germany urgently needs to
boost its growth rate.

German gross domestic product is expected to grow just 1
percent this year, the weakest rate in the 25-nation European
Union. Unemployment hit a postwar high in February of over 5.2
million people, 12.6 percent of the workforce.