What happens if the election is close?

Germany holds an election on Sunday that opinion polls suggest will be extremely close and could yield a hung parliament, potentially leading to several weeks of uncertainty before a new government is formed.

Angela Merkel's conservatives (CDU/CSU) are expected to form the largest bloc in parliament but they may not have enough support to form a centre-right coalition with their preferred partners, the liberal Free Democrats (FDP).

That could push them towards a "grand coalition" with Chancellor Gerhard Schroeder's Social Democrats (SPD).

Other scenarios are conceivable, however, if the incumbent SPD-Greens coalition can team up with another of the smaller parties to keep Merkel out of government. A complicating factor is that voters in one electoral district, in Dresden, will not cast their ballots until October 2 after the death of a candidate there. If the nationwide result on Sunday is very close, the Dresden vote could hold up the outcome of the entire election.

Here is what could happen.

¤ Calling a new Parliament and naming a Chancellor

A new Parliament meets at most 30 days after the election, leaving the parties a few weeks to strike a coalition deal.

Until the new Parliament meets, Mr Schroeder's government will continue to administer the country's affairs.

President Horst Koehler must propose a Chancellor to Parliament for approval. His choice will follow discussions with the parties and will depend on which candidate appears to have secured a viable coalition.

¤ A Merkel government

Opinion polls forecast that the CDU/CSU will form the largest bloc in Parliament, meaning Ms Merkel is the most likely new Chancellor.

She wants a centre-right coalition with the liberal FDP, with whom the conservatives ruled for 16 years under Helmut Kohl until 1998. But the SPD appears to be her only viable alternative partner if she cannot form a government with them.

¤ Alternatives

If the numbers in Parliament allow it, the SPD could seek a majority of their own by extending their current coalition with the Greens to embrace either the FDP or the Left Party.

Such a deal could deny Ms Merkel the chancellorship, even if the conservatives are the largest party in parliament. But it would require bridging big policy and personal differences.

FDP and Green leaders have ruled out working with each other. Mr Schroeder has ruled out governing with the Left Party, although some in his party have been more open to the idea.

¤ Coalition agreements

Whatever coalition is formed, the parties involved will have to sign a formal coalition agreement laying out policy positions, a process that can take a number of weeks, even between parties with similar positions.

Given wide differences between the opposing parties in areas from tax to social welfare and foreign policy, any coalition talks would probably be extended and extremely difficult.