Merkel, Schroeder confident on deal

German conservative Angela Merkel and Chancellor Gerhard Schroeder voiced optimism after talks yesterday that their rival parties would reach a power-sharing agreement and overcome a row over who should lead the country.

A visibly pleased Merkel, whose party had threatened to break off talks before the meeting if Mr Schroeder did not agree to step down, said she was "more optimistic than pessimistic" following the two-and-a-half hour meeting.

Mr Schroeder also struck a positive tone. "The exploratory talks have shown that there is a basis for a grand coalition," he told reporters.

The rivals were forced to negotiate with each other after neither won enough support in a September 18 election to forge a majority with their preferred allies.

They have been at odds over who should run the country since Mr Schroeder refused to concede defeat on election night despite being narrowly beaten by Merkel's Christian Democrats (CDU) and sister party Christian Social Union (CSU).

Both Ms Merkel and Mr Schroeder said a special meeting would take place in the very near future to clear up the chancellor question.

Only Ms Merkel, Mr Schroeder, SPD chief Franz Muentefering and CSU head Edmund Stoiber will attend that discussion, they said.

"We have agreed that there will be a leadership discussion to clear up these issues, notably the personnel issues, the way a government would work and eventually also certain issues of substance," Ms Merkel said.