Germany's grand coalition on brink of collapse

His announcement came less than a day after Franz Müntefering, the Social Democrat party leader, said that he would resign his post after his party's leadership snubbed him by electing a left-wing rival, Andrea Nahles, 35, to the important job of party general secretary on Monday.

The developments have sent shock waves through Germany's political establishment, prompting MPs from both prospective coalition partners to warn that the chances of an alliance between the two parties are now seriously endangered.

Jürgen Rüttgers, the conservative Prime Minister of North Rhine-Westphalia, said: "The situation is extremely grave. Whether there will be a grand coalition at all is now a completely open question." Gernot Erler, the deputy Social Democrat leader, said: "The whole idea of our two parties co-operating to form a government is under examination."

The urgency of the situation was underscored by unconfirmed reports that Germany's conservatives had already all but abandoned the idea of forming a grand coalition with the Social Democrats and were considering 26 March next year as the earliest date for a new general election.

In an attempt to rescue the situation, Mr Müntefering said yesterday that, despite his resignation as Social Democrat leader, he wanted to stay on as prospective vice-chancellor and labour minister in the planned grand coalition. Earlier, he had said he was not sure whether he wanted either of the jobs.

Mathias Platzeck and Kurt Beck, the Social Democrat prime ministers of Brandenburg and Rheinland-Pfalz, were tipped as candidates to replace Mr Müntefering as leader.

The conservative Christian Democrats headed by Angela Merkel, the Chancellor-designate, were obliged to begin talks with the Social Democrats after neither party obtained a big enough majority to govern in the inconclusive general election on 18 September.

The talks are at a crucial stage with both camps under pressure to reach a consensus on future policy before a deadline of 12 November. Mr Müntefering, a close ally of the departing Chancellor, Gerhard Schröder, who also worked well with Mr Stoiber, was regarded as the linchpin of the planned coalition. Mr Stoiber's decision to abandon his intention to become economics minister is seen as a direct result of Mr Müntefering's resignation.