Schröder Meets Merkel Amid Rumours of His Resignation

Chancellor Gerhard Schröder 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 Schröder 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 Schröder 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 Schröder 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 Schröder, 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 Schröder would take place this evening.

Inevitably, there is yet more speculation that Mr Schröder is preparing to fall on his sword, paving the way for the first grand coalition in Germany since the 1960s and Mrs Merkel's appointment as Germany's first woman chancellor.

Talks had previously stalled over the chancellorship. On Monday Mr Schröder appeared to signal a retreat from his earlier rhetoric, striking a more humble tone and saying his fate now lay in the hands of his party. Leading SPD figures were yesterday still insisting he had to keep his job.

But it now seems likely Mr Schröder will resign, provided Mrs Merkel is prepared to make concessions on cabinet posts and policy issues.