Germany was poised last night for a dramatic change of political direction after the Chancellor-elect, Mr Gerhard Schroder, announced that his Social Democrats (SPD) would begin coalition talks with the environmentalist Greens on Friday.
Sunday's federal election, which ousted Dr Helmut Kohl from power after 16 years, gave the SPD and the Greens a joint majority of 21 seats in the new Bundestag, more than twice the majority enjoyed by the previous centre-right government.
"The conditions have been fulfilled, so the coalition negotiations with the Greens are the logical consequences of the election," Mr Schroder said.
He dismissed fears that the Greens would make unrealistic demands and would be unreliable coalition partners but he admitted that coalition negotiations could be difficult.
"These talks will begin on Friday but we will be putting caution before haste. They should move forward at a brisk pace, but there won't be any pressure. The pressure we have felt the last few months is now gone," he said.
The parties have 30 days to agree terms for a coalition but most observers last night expected a new government to take office within two weeks. The Greens can expect to control three ministries, including the foreign ministry, which is likely to go to their parliamentary leader, Mr Joschka Fischer.
"It is not the first time that I have said that I could imagine Joschka Fischer in that office", Mr Schroder said.
Mr Fischer declined to speculate on his future but sought to reassure Germany's allies that they have nothing to fear from a Green foreign ministry. Although the Greens favour the eventual dissolution of NATO and its replacement by a new security structure that includes Russia, Mr Fischer is adamant that Germany will not leave the western alliance.
Mr Fischer is committed to further economic and political integration in Europe and has long been an advocate of the euro, in contrast to Mr Schroder, who was sceptical about the project until recently.
Mr Schroder sought to play down his former doubts about the single currency yesterday and promised to do all he could to make the project a success.
"Whether the timing of the euro is right or not is now a historical question. We just have to make it work," he said.
The outgoing Finance Minister, Mr Theo Waigel, yesterday stepped down as leader of the Bavarian Christian Social Union (CSU). He is expected to be succeeded by Bavaria's prime minister, Mr Edmund Stoiber, one of the most conservative and nationalist figures in mainstream German politics.
The Christian Democrats saw their share of the vote fall to 35 per cent on Sunday, their worst result since 1949 and the most devastating election defeat in the party's history. Dr Kohl yesterday repeated that he accepts personal responsibility for the election defeat and that he intends to step down as leader at a party conference on November 7th.
The favourite to succeed him is the CDU's popular parliamentary leader, Mr Wolfgang Schauble.
Although Mr Schroder is promising continuity in foreign policy, an SPD-Green government is likely to bring radical changes to Germany's economic and social policies.
The Greens are committed to closing all nuclear power stations immediately but are expected to agree to a phased closure over a limited period. Both parties want to reverse some of Dr Kohl's reforms of social welfare and labour law and taxation will, in future, be linked to environmental criteria.
Reuters adds from Bonn: Mr Schroder said yesterday his new centre-left government would curb speculation on capital markets and support British and French proposals to reform global finance.
Mr Schroder said he would strive for continuity in German foreign policy, particularly towards Europe.
"For the new government, strengthening international co-operation to fight speculative activity on financial markets will be a top priority," Mr Schroder said.
