German Chancellor Gerhard Schroeder and opposition leader Angela Merkel held their first face-to-face talks today to try to resolve disputes over who should govern Germany.
Ms Merkel said her conservative Christian Democrats and Schroeder's Social Democrats agreed to further coalition talks next week but disagreed over who has mandate to run Germany.
Merkel told reporters the talks took place "in a constructive atmosphere."
German Chancellor Gerhard Schroeder and his conservative rival Angela Merkel emerge from talks in Berlin today. REUTERS/Arnd Wiegmann.
However, Merkel who narrowly beat Schroeder's party in Sunday's parliamentary balloting and ended his seven-year coalition with the environmentalist Greens, also said there were 'clear differences' between the parties.
The margin of victory was so slim that Schroeder refused to acknowledge defeat, insisting he should remain as chancellor to manage reforms that so far have failed to fire up Europe's largest economy.
With neither major party able so far to muster enough support from smaller groups to form a majority in parliament, political leaders said before today's meeting that Schroeder and Merkel would look seriously at joining up in a "grand coalition."
But it remains unclear how they would resolve their competing claims to be chancellor, raising speculation that both might have to stand aside or that another election would have to be held.
Merkel, leader of the Christian Democratic Union, and Edmund Stoiber, head of the CDU's Bavaria-only sister party, insisted Germany needed a stable government and called on Schroeder to accept defeat.
"The Social Democrats must begin to accept that they did not win the election, but that they lost the election," Stoiber said after the pair met with leaders of the Free Democrats.
The pro-business Free Democrat party was Merkel's preferred coalition partner, but their combined parliament total fell short of a majority.
Merkel also rejected the possibility of forming a minority government as "not in line with Germany's position as a major country in the world."
With the Greens all but ruling out joining a coalition with Merkel and the Free Democrats refusing even to talk to Schroeder's party, the Social Democrats and conservatives were under growing pressure to seek common ground for a left-right alliance.
All Germany's established parties ruled out talks with the new Left Party, a grouping of former East German communists and renegade Social Democrats opposed to cuts in the country's creaking welfare programs.
The Christian Democrats and the Bavarian Christian Social Union won 35.2 percent of the votes in Sunday's election, just ahead of the 34.3 percent taken by the Social Democrats.
The result was a shock for the conservatives, who went into the election buoyed by opinion polls that consistently gave them more than 40 percent support, and Merkel's authority within her own party has been damaged.