Gerhard Schroeder, Angela Merkel to hold showdown talks on German leadership

Conservative leader Angela Merkel and Chancellor Gerhard Schroeder on Sunday headed into a showdown over who will lead a new government, seeking to end a post-election stalemate that is delaying efforts to tackle Germany's stubborn economic problems.

Three weeks after parliamentary elections, opposition conservatives and Schroeder's Social Democrats moved toward the formation of a so-called "grand coalition" of the country's main parties of the right and left.

But the parties remain at loggerheads over whether Schroeder should extend his seven years at the head of the government, or whether Merkel should become Germany's first female chancellor. It appeared Sunday that a decision on who will be chancellor and how Cabinet posts might be shared is likely to be firmed up only on Monday after the leaders consult with party officials.

Schroeder, who returned to his home in Hanover on Saturday, was meeting Sunday afternoon with his key ally _ Social Democratic Party Chairman Franz Muentefering _ to prepare for the evening session with Merkel and her fellow conservative leader Edmund Stoiber, party officials said.

The officials, who spoke on condition of anonymity, said plans have been modified so that the results of Sunday night's meetings will be presented to party meetings on Monday morning, after which the four leaders will come back together at 11:00 a.m. (0900GMT). Only then will the parties be able to sign off on a deal.

Should the deadlock be resolved, the way would be open for formal coalition negotiations. The leaders have sworn to make no public disclosures on their negotiations until they have party approvals. Conservatives narrowly won the Sept. 18 election, defeating Schroeder's coalition with the environmentalist Greens despite a late surge in support for the Social Democrats.

Merkel's Christian Democratic Union and Stoiber's Christian Social Union have 226 seats in the 614-seat lower house of parliament, four seats more than the Social Democrats. A coalition needs 308 seats for a majority.

But Merkel failed to reach 308 seats with her preferred center-right coalition partners, the pro-business Free Democrats, forcing the two largest parties toward uncomfortable talks on a broad left-right alliance.

In several rounds of exploratory talks, the two parties have identified a string of fields where they believe they can work together, including reforming Germany's tangled federal system and shoring up the government's overdrawn finances.

They also agree on the need for economic reforms to address double-digit unemployment and shore up the creaking welfare state _ though the Social Democrats reject Merkel's plans to cut the power of labor unions and make it easier for firms to hire and fire.

The parties also differ on foreign policy. Merkel is eager to patch up relations with the United States damaged by Schroeder's opposition to the war in Iraq and is critical of his support for Turkey's bid to join the European Union. Some Social Democrats remained defiant, insisting agreements on policy should come before those on personnel, AP reports.

A.M.