The road ahead is finally clear for Germany's conservative party leader Angela Merkel to become the country's first female chancellor. After three weeks of political wrangling following the very tight election result of 18 September 2005, the two big parties (conservative CDU and centre-left SPD) have agreed to form a so-called grand coalition under Mrs Merkel's leadership. However, with wide differences in the respective political programmes of the two partners, this is likely to be just the start of long talks on the policies of the coalition government.
Before the elections, business had hoped for a chancellor Merkel in a position to implement far-reaching economic reforms. In a grand coalition, however, this looks increasingly unlikely, as the parties differ on too many key points such as labour market and tax reforms and the overhaul of the German health system. In addition, the close election result has shown that voters have expressed a clear "nein" to a radical neo-liberal competitiveness agenda as proposed by the conservatives and liberals.
Some business leaders fear a standstill on economic reforms or political instability, which could hamper further reforms and economic growth.
Apart from deciding on the chancellor, CDU and SPD have so far agreed on the Social Democrats to lead the ministries for finance, justice, environment, health, development, transport and labour, as well as the foreign ministry. The leader of the CDU's sister party CSU, Edmund Stoiber, will become minister for economic affairs. It is as yet unclear if current chancellor Schröder will have a role to play in the new government.
As for the contested issue of Turkish EU membership, it is likely that the Christian Democrats will have to soften their stance. Up until now, they had insisted on a 'privileged partnership' approach rather than full membership.
