First coalition talks between Germany's two biggest parties ended without immediate agreement Thursday, with conservative leader Angela Merkel saying there were "clear differences" between her and Chancellor Gerhard Schroeder.
"Differences of opinion between the two sides were clear," Merkel said after the discussions, which were aimed at working out how to end the debilitating political stalemate caused by Sunday's inconclusive general election.
Germany's future depends on which of the two main parties will win the race to assemble a governing coalition.
Both Merkel, whose Christian Democrats (CDU/CSU) narrowly won the election but without enough seats to gain a majority, and Schroeder insist they should lead the country. They agreed to meet again next Wednesday.
Thursday's one-hour discussions set the tone. "I made it clear that I, together with the Christian Democrats, have a mandate to form a government," Merkel said.
"We made it clear we want to govern with Schroeder as chancellor," retorted Social Democrats' leader Franz Muentefering.
Nevertheless, most observers believe the final outcome will be a so-called grand coalition of conservatives and Social Democrats.
Muentefering said the meeting on Wednesday would give the parties "a better chance to judge whether this configuration has any prospects."
A poll released on Thursday by the Emnid institute showed 47 percent of Germans would like to see Merkel lead a grand coalition, against 44 percent for Schroeder.
Before her meeting with Schroeder's party, Merkel held initial discussions with the pro-business Free Democrats, her preferred coalition partners.
Aiming to become the country's first woman chancellor, Merkel, 51, said the Christian Democrats would not accept a minority government.
She said: "I do not believe a minority government is fitting for a country as important as Germany."
Merkel also poured cold water on an alliance with the Greens - the junior partner in Schroeder's outgoing coalition - whom she will meet for talks on Friday.
One proposal has been for the Christian Democrats to join with the Federal Democrats and the Greens in a coalition dubbed "Jamaica" because the parties' black, yellow and green colours would match the Caribbean nation's flag.
Joschka Fischer, the foreign minister and the highest-profile member of the Greens, said he believed the differences between their parties were too great for that combination to work.
"I just can't see how Jamaica would work," he told the Berliner Zeitung in an interview to be published Friday.
He said he thought Germany would end up with a grand coalition.
Newspapers reported on Thursday that Schroeder's party had raised the idea of changing the rules of parliament in order to give it a numerical advantage in seats.
One suggestion - denied by the SPD - would be to divide the conservative parliamentary bloc into its two constituents, the Christian Democratic Union and its Bavarian sister party, the Christian Social Union (CSU).
Each party would then have fewer seats than the Social Democrats, allowing Schroeder to claim his group was the biggest in the Bundestag lower house.
CSU leader Edmund Stoiber, who was also taking part in the negotiations on Thursday, hit out at this plan, saying Schroeder's party must "accept that it has not won the election and that it has lost it".
"They cannot correct the election result with legal tricks... it will not work."
Meanwhile German business leaders are worried that the process of forming a government will drag on for weeks, delaying economic reforms seen as urgently needed and doing nothing to cut a crippling 11.4 percent unemployment rate.
"We've been on a economic downtrend for the past three years that needs to be stopped," said Dieter Hundt, the head of the BDA employers association.
"Without a new start that has growth and employment as its top priority, that downward trend will continue."
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