GERMANY: Germany's grand coalition began to take shape yesterday after leaders of the Social Democrats (SPD) and Christian Democrats (CDU) agreed they were "obliged to form a stable government" with each other.
Chancellor Gerhard Schröder and CDU leader Angela Merkel put aside their leadership demands and held "constructive, sensible and useful" talks discussing the possibility of finding common ground on economic reforms and financial policy.
"I take it that we will succeed in bringing about a stable coalition to hold Germany's reform course and to supplement it," said Mr Schröder.
"I was pleased that we talked about the question of how to renew the country without endangering social cohesion."
He avoided the leadership dispute, saying that in this exploratory phase, "it would be politically wrong to make personnel ultimatums".
CDU leader Angela Merkel struck a surprisingly similar tone a few minutes later, making it clear both sides were in basic agreement, but approaching the problem from opposite routes.
"We are all agreed that if it should come to a grand coalition then large reform projects must be tackled, including the need for economic sense to be brought in line with social justice," she said.
"Such a coalition must never work at the lowest common denominator of agreement but take large steps."
Bavarian premier Edmund Stoiber, leader of the CDU sister party the Christian Social Union (CSU), said: "I had the impression today that [ the SPD] want a solution with the CDU/CSU. I hope the SPD will give a signal already during these talks that they accept the leadership claim of Mrs Merkel."
The two sides spent over two hours of "talks about talks" yesterday, discussing issues from childcare to pensions. On the table at next Wednesday's talks are issues on which they have divergent views, such as Turkey's EU ambitions and healthcare reform.
Now all eyes turn to Sunday's byelection in Dresden, postponed by two weeks after the death of a local candidate. The CDU candidate is neck and neck with the leading SPD candidate, according to opinion polls.
An extra seat could increase the CDU insistence that Mr Schröder stand down, while a seat for the SPD could increase its determination to be treated as an equal partner in coalition talks.