Talks offer glimpse of hope in Germany's post-election stand-off

But in their first discussions since the election, both leaders were adamant they would not give up their claims to the Chancellor's job in a possible governing alliance. Mr Schröder and Ms Merkel refused to comment on suggestions that they might be considering a plan to share the Chancellor's post on a two-year rotation basis, which could suit both parties.

After the hour-long talks, Ms Merkel said she would not back down on her claim to the Chancellor's job. "As far as this is concerned, there are certain insights which must be left to mature within the Social Democratic Party," she said.

Franz Muentefering, the Social Democrat leader, reiterated his party's commitment to seeing Mr Schröder remain Chancellor. "Everyone is well aware that all parties bear a great responsibility to form a stable government as quickly as possible," he said. "We are a long way from negotiations, but we have opened the perspective for concrete talks."

Mr Schröder, asked whether he was considering the possibility of sharing the Chancellor's post with Ms Merkel - technically feasible under parliamentary rules - said he had nothing to add to his party leader's statement. Ms Merkel refused to be drawn on the issue.

The talks offered a glimpse of a possible breakthrough in the political impasse that has paralysed the country since the general election. The result, which gave Ms Merkel's party a mere 0.9 percentage point lead over Mr Schröder's Social Democrats, left no party in a position to form a government with its preferred political allies.

The first opinion poll since the election showed that a majority of Germans favoured Ms Merkel as future German Chancellor, reversing the pre-election trend which backed Mr Schröder for the post. Several observers had predicted that initial coalition talks between the two rivals would end in deadlock, so yesterday's outcome came as a surprise. Both sides agreed to resume discussions next week.

But analysts remain deeply sceptical about the viability of a grand coalition. They say an alliance between parties with fundamentally different political viewpoints would produce a lame duck government incapable of introducing the economic reforms Germany needs.

The last time Germany was ruled by a grand coalition, in the 1960s, the government merely served as a transitional arrangement which eventually led to the election of a Social Democrat administration after years of conservative rule.

Ms Merkel's Christian Democrats are to begin sounding out the Green party today over their other option, the possibility of forming a so-called "Jamaica coalition" of conservatives, liberal Free Democrats and Greens.

The liberals appeared to have dropped much of their initial opposition to the idea and said they were prepared to let Ms Merkel's party do the initial bargaining for them. But the Greens remained divided on the issue.

The radical Left Party appeared to have dropped its outright opposition to backing Mr Schröder's Social Democrats in government. Oskar Lafontaine, the former left-wing finance minister, joined other Left Party MPs yesterday in saying he considered a possible arrangement with the SPD "an exciting constellation". Mr Schröder has ruled out any alliance with the Left Party.