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German Parties Begin Haggling After Inconclusive Election

Conservative leader Angela Merkel (search) and the chairman of Chancellor Gerhard Schroeder's Social Democratic Party (search) said Monday they both had initiated contacts with potential coalition partners as they wrestled over what government will emerge from Germany's inconclusive parliamentary election.

Merkel urged her rival's party to "accept that they are not the strongest party" after Sunday's election and enter talks on a broad right-left alliance under her leadership. But within minutes, the chairman of the Social Democrats, Franz Muentefering (search), said he had written to other party leaders to invite them to hold talks on a new coalition.

"I have initiated contact with the offices" of the other parties, Merkel said.

She added that she, like Schroeder, would refuse to hold talks with the Left Party — an alliance of ex-communists and former Social Democrats angered by the chancellor's efforts to trim the welfare state.

Muentefering said any linkup between his party and Merkel's would be without Merkel as chancellor.

"The message was clear: this country does not want Mrs. Merkel as chancellor," he said.

Voters denied a majority to both Schroeder's outgoing government of Social Democrats and Greens and Merkel's preferred combination of her Christian Democrats and the pro-business Free Democrats (search).

As Germany's benchmark stock market and the euro dropped amid gloom over the muddled outcome, leaders of the main parties met in Berlin to plan their next move.

Official results showed Merkel's party and their Bavarian sister party, the Christian Social Union (search), winning 225 seats, three more than the Social Democrats. The Free Democrats got 61, the Greens 51 and the new Left Party, an alliance of ex-communists and former Social Democrats alienated by Schroeder's efforts to trim the welfare state, 54.

Those results were based on counting from 298 of 299 districts; voting in the final district, in the eastern city of Dresden (search), has been delayed until Oct. 2 because of a candidate's death.

Schroeder refused to back off his claim to form a new coalition, saying that his party "has made clear its will to lead this country in government."

"Our task is to implement this declared will of our whole party, and we will do that," he told cheering supporters in a brief appearance at the Social Democrats' headquarters. He did not elaborate.

"I do not rule out anybody revising their position," Merkel said of Schroeder. She said a new government should be formed quickly, adding that "we are not playing for time."

A "grand coalition" of the two main parties appeared a likely outcome.

However, conservative leaders said they also would seek talks with the Greens on a three-way combination that would include the Free Democrats — winning a cool initial reaction.

Foreign Minister Joschka Fischer (search), who led the Greens' campaign, said he would not serve in a Merkel Cabinet.

"We are interested in content," Greens co-leader Claudia Roth said on ARD television. "We are not interested just in governing, we are interested in politics."

Merkel likely will have to water down plans to shake up Germany's labor market and reform its tax system to gain a majority with a party to her left. To woo the Greens, she likely would have to soften plans to halt the outgoing government's program of shutting down nuclear power plants. Her opposition to Turkish membership in the European Union also is up in the air.

German share prices dropped following Merkel's failure to gain a clear mandate to deepen reform of Europe's biggest economy, which suffers from an 11.4 percent jobless rate. Frankfurt's DAX index of blue chip stocks was down 1.1 percent in early afternoon trading.

Schroeder, who described the conservatives' result as "disastrous," taunted Merkel in a joint television appearance Sunday night, saying she would not receive the post of chancellor in any deal with the Social Democrats.

With the Left Party ruled out as a partner, Schroeder's only option besides a "grand coalition" with the Christian Democrats would be a combination of Social Democrats, Greens and Free Democrats — a possibility the latter immediately rejected.

If the new parliament cannot elect a chancellor in three tries, President Horst Koehler (search) could appoint a minority government led by the candidate with a simple majority.

Both major parties suffered losses in the election, with Merkel's Christian Democrats winning 35.2 percent of the vote, with 34.3 percent for Schroeder's party. Three years ago, both scored 38.5 percent.

The three smaller parties all performed strongly, with the Free Democrats winning 9.8 percent, 8.1 percent for the Greens and 8.7 percent for the Left Party.