Schroeder, Merkel hope for lift from Dresden vote

Germans in a late-voting district cast their ballots on Sunday two weeks after the country's most inconclusive election since World War Two left both sides hoping to bolster their claims to power.

Polls in the eastern city of Dresden opened at 8 a.m. (0600 GMT) and close at 6 p.m. (1600 GMT). There are about 219,000 eligible voters in the district, where the September 18 general election was postponed due to the death of a local candidate.

Angela Merkel's conservatives won three seats more than Chancellor Gerhard Schroeder's Social Democrats in last month's national vote, but neither side won a majority in the 613-seat parliament.

Even though the outcome in Dresden is not expected to change the preliminary September 18 result significantly, Germany's voting system means Schroeder's SPD could gain a seat or two and strengthen his hand in negotiations with Merkel.

The hung parliament has pushed the two main parties to explore joining forces in a "grand coalition" and financial markets have warmed to the prospect, believing it well suited to mastering the country's various economic woes. Share prices have climbed to 3-1/2 year highs this week.

But the negotiations could take months and may never get off the ground because both Merkel and Schroeder are insisting they should lead the next government. The CDU and SPD could, in theory, form separate three-way alliances with smaller parties.

Because of Germany's complex system, the Dresden vote could wipe out the CDU's parliament lead only if the SPD wins 140,000 votes more than the CDU. The district has only 219,000 voters and a 140,000-vote margin of victory is seen as virtually impossible.

That has not stopped both Schroeder and Merkel from campaigning in the district in Dresden, 200 km (120 miles) south of Berlin. The rest of the 299 districts voted two weeks ago.

Schroeder and Merkel attacked each other as unqualified to lead Germany at separate campaign rallies in Dresden on Friday, Reuters reported.