Fischer delivers blow to Merkel's coalition hopes

A special meeting of the Christian Democrat parliamentary party formally reinstated Ms Merkel as its leader by 98 per cent of the vote, putting her in place to lead the CDU in talks aimed at forming a conservative-led coalition government.

But there was little doubt her party remained disappointed by her failure to achieve the majority it needed to form a government in the election.

And Ms Merkel's hopes of forming a so-called "Jamaica coalition" with the liberal Free Democrats and Greens was dealt a serious blow yesterday. Joschka Fischer, the Foreign Minister and the Greens' most prominent member, announced he planned to step down from front-line politics if a new government was formed. "It is realistic to expect that the Greens will not form part of any new government," Mr Fischer said, declaring that he would not stand for the post of the Greens' parliamentary party leader. He said he planned to remain an MP, but on the back benches.

Under Ms Merkel's leadership, the Christian Democrats beat the ruling Social Democrats by just 0.9 of a percentage point, thus depriving her of the votes she needed to form a coalition with the liberal Free Democrats that would have ousted Chancellor Gerhard Schröder from power.

Yesterday's show of support appeared little more than an attempt to buy Ms Merkel time. The conservative leader, 51, is under pressure to form a coalition with other parties and form a government that could elect her Chancellor.

With other parties apart from the liberals offering no prospect of an alliance so far, several Christian Democrats are discussing forming what would be a highly vulnerable minority government as a last resort.

Horst Köhler, the President, responded to international and business criticism of the failed election by urging all parties to "work seriously at forming a coalition government as quickly as possible".

ButMr Schröder insistshe will not form a coalition with Ms Merkel as Chancellor. His Social Democrats leaked plans toBild newspaper, which envisaged Mr Schröder remaining Chancellor of a so-called "grand coalition" with the conservatives, providing she renounced her bid for the post.

"There has never been a German Chancellor prepared to sacrifice his job to allow a new government to be formed," the paper quoted SPD sources as saying.

The SPD appeared to be banking on Ms Merkel failing to form a "Jamaica coalition". In that case, the conservatives would be forced into negotiations with the Social Democrats.

Bild said Mr Schröder was convinced that the Christian Democrats would ditch Ms Merkel if it was the price they had to pay to hold power in a grand coalition. The paper said the Social Democrats wanted to cut a deal with the conservatives which would enable Mr Schröder to remain Chancellor for two years. After that a conservative, other than Ms Merkel, could take over as Chancellor for the remainder of the government's tenure.

Attention also focused on the potential key role the Left Party could play in determining the next Chancellor when the issue is put to a parliamentary vote.

Germany's established parties refuse to consider including the Left Party in any coalition, although it won a record 54 seats. They claim that despite its success, the party is an extremist far-left organisation with unworkable policies.

But,as neither of the main party groupings in the German parliament controlled an absolute majority, the Left Party's votes could swing the choice of Chancellor either way.

Oskar Lafontaine, the former left-wing finance minister who defected from the Social Democrats to the Left Party said his party would not support either candidate. But the possibility that some Left Party MPs would back Mr Schröder as the "lesser of two evils" in the secret parliamentary ballot could not be ruled out.