Merkel agreed to meet Schroeder amid rumors of his resignation

Chancellor Gerhard Schrцder of Germany is to hold an "imminent" summit with his conservative rival Angela Merkel, amid speculation that he is now preparing to resign - possibly as early as today.

Mr Schrцder yesterday said he is to hold a meeting with his conservative rival to determine which of them should be the next chancellor. The announcement is the strongest sign yet that there could be a breakthrough in the political crisis that has gripped Germany since its inconclusive election more than two weeks ago.

Mr Schrцder said there was "a basis" for a coalition between their two parties following the latest round of exploratory talks with Mrs Merkel in Berlin. The talks would happen "very, very soon", he said. But it was not clear last night whether Mr Schroeder has finally decided to resign - possibly as early as this evening - or will continue to insist that he should lead the new coalition as chancellor.

A relaxed-looking Mrs Merkel yesterday emerged from two-and-a-half hours of talks with Mr Schrцder, declaring: "It's been a good day for Germany." Mrs Merkel said she was "now more optimistic than pessimistic" that a "grand coalition" could work. The talks had been "very successful", she added. Last night officials from Mrs Merkel's Christian Democrat party said the summit with Mr Schroeder would take place this evening, reports Guardian.

According to Financial Times, Franz Mьntefering, chairman of the SPD, said Wednesday's exchanges over fiscal, labour market and social policies would be the last before the start of formal coalition negotiations between the two political parties.

"I want to tell my party tomorrow that the talks were worth the effort and that we should now enter formal coalition negotiations," he said.

Norbert Rцttgen, a senior aide to Ms Merkel, told the FT shortly before the meeting that Mr Schrцder had precipitated one of the country's gravest political crises in decades by insisting on becoming chancellor despite his SPD winning fewer seats than the CDU in elections on September 18.

The situation was not unlike a wage negotiation, a senior SPD MP said. "The two sides may threaten to walk away, they might even stop talking to each other for a while, but at the end of the day they will sit down and agree."

P.T.