Berlin coalition falls over £22bn debts

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Germany's bankrupt capital plunged deeper into crisis yesterday when its governing coalition collapsed, a development likely to sweep the post-communists of the East to power for the first time since the fall of the Wall.

News of the long-awaited demise of the "grand coalition" that has been running Berlin ­ and running up debts ­ for 10 years became official after a night of fruitless haggling, with Social Democrats and Christian Democrats blaming each other for the débâcle. Chancellor Gerhard Schröder then weighed in, declaring that he would not stand in the way of his Social Democrat colleagues entering into some kind of an arrangement with the Party of Democratic Socialism (PDS), the heirs of the East German communist regime.

Fear of the red menace had kept Social Democrats and Christian Democrats together, and the PDS on the margins. Although the PDS has only tiny support in West Berlin, it is the biggest party in many of the eastern districts. For 10 years its voters have felt disenfranchised.

Eberhard Diepgen, the Christian Democrat governing mayor, had implored the Social Democrats to stick with him, warning against "breaking a taboo". But Mr Diepgen's party and some of his closest aides have been implicated in a string of sleaze scandals, and the Social Democrats felt it was time to abandon the sinking ship.

The most likely outcome of the fall of the regional government is early elections in the autumn. Despite the scandals and evidence of blatant mismanagement and nepotism, the Christian Democrats still have a narrow lead in the polls, and Mr Diepgen remains the least unpopular of all the likely candidates for his post. But the polls also show that the Christian Democrats will not be able to muster a majority, because no party wants to govern with them. That leaves a Social Democrat-led administration propped up by the PDS and the Greens.

Mr Schröder accused the PDS of running an "extremely superficial" programme. Whoever runs City Hall will have to take highly unpopular measures to rein in Berlin's debts of about DM70bn (£22bn).