German parties set to complete coalition talks

German Chancellor Gerhard Schroeder and conservative leader Angela Merkel meet today to conclude talks on who will lead Germany…

German Chancellor Gerhard Schroeder and conservative leader Angela Merkel meet today to conclude talks on who will lead Germany's expected "grand coalition".

Mrs Merkel's Christian Democrats (CDU) and Mr Schroeder's Social Democrats (SPD) have all but agreed that the two parties, the largest in Germany, should join forces in government after the CDU won four seats more than the outgoing government of Mr Schroeder.

However, the position of chancellor has been the sticking point.

Mrs Merkel; her Bavarian ally Edmund Stoiber, head of the Christian Social Union; Mr Schroeder; and his party chairman, Franz Muentefering, are expected to conclude what looks like the last outstanding at meeting beginning 4 pm this afternoon.

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There are signs the Mr Schroeder (61) could be prepared to give up the job he has held since 1998. Mrs Merkel, who grew up in East Germany, would be the country's first woman chancellor.

Germany's top-selling Bildnewspaper, which is broadly supportive of the centre-right, said Mrs Merkel was likely to become chancellor if she held her nerve. "Schroeder will not make it as the SPD's minority chancellor as long as the majority chancellor [Mrs Merkel] doesn't allow herself to be hustled out," the newspaper said.

Once Europe's economic powerhouse, the incoming chancellor must address the country's weak growth, high unemployment and a stubborn budget deficit.