Press reports this morning make it sound like a Red-Black Grand Coalition is all but inevitable in Berlin:
A day after meeting with leaders of the Social Democratic Party, Mrs. Merkel said Thursday, "The possibility or likelihood of a coalition with the S.P.D. is much higher than the other constellations."
[…]There is growing optimism that such an arrangement might work quite well, contrary to initial predictions that it would lead to gridlock and then collapse of its own weight, necessitating another election.
"I see a very good chance for a grand coalition to push through some of the reforms the previous government started," said Peter Lösche, a professor of politics at the University of Göttingen. "They already have a consensus on some issues."
There remains a great deal of skepticism about the efficacy of a grand coalition. Heiner Flessbeck has an interesting analysis in taz where he states that the coalition can only succeed if both the SPD and CDU "toss their party programs in the garbage." The number one requirement is to stimulate the domestic market ("Binnenmarkt"):
In Deutschland gibt es derzeit fast alle Zutaten, die man für hohes Wachstum braucht – nur eine einzige extrem gewichtige fehlt: eine kräftig steigende Binnennachfrage.
And (via Der Spindoktor) the political scientist Franz Walter only sees a grand coalition working if neither Schroeder nor Merkel are chancellor. A completely different type of political leadership is required to build consensus that might actually accomplish something:
Und die Erkenntnis, die man daraus gewinnen kann, ist eindeutig: Weder Schröder noch Merkel taugen auch nur im Geringsten als Kanzler einer Großen Koalition. Große Koalition mit zwei annähernd gleich starken Parteien funktionieren nur, wenn niemand an der Spitze steht, der als Truppenführer der einen Formation in den zurückliegenden Schlachten der anderen Seite tiefe Wunden zugefügt hat.
Mehr noch: Große Koalition von gleichermaßen potenten Parteien vertragen keine Kraftnatur an der Spitze, keinen kalten und zielstrebigen Machtmenschen, keinem eifernden Ordnungs- und Richtungspolitiker.
Will the delayed election in Dresden on Sunday change the dynamics at all?

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However, one might take a glance at the successful coalition in Bremen over the last few years. A strong leader works wonders and I personally feel that, should one or other of the two potential candidates have to take the lead, Schroeder would make the better Chancellor.
Pi.