Merkel boosted by party support

Angela Merkel's lead dwindled as the campaign progressed

Germany's conservative leader Angela Merkel has won overwhelming backing from her party despite their failure to win a ruling majority in the election.

The Christian Democrats (CDU) and their CSU allies voted by 98% to keep Mrs Merkel as their parliamentary leader.

Her rival, the SPD's Gerhard Schroeder, won just three seats fewer in Sunday's election and has said he will also try to form a coalition.

Tough bargaining between the two sides is expected in the coming weeks.

Both parties will hold talks later this month with smaller parties in an attempt to find coalition partners, as neither side wants to cede power to the other in a joint "grand coalition".

Rivals circling

Speaking after the CDU/CSU vote, Mrs Merkel said it underlined that the conservatives had the right to lead negotiations on forming a new government.

She has previously urged the SPD to "accept that they are not the strongest party".

PROVISIONAL ELECTION RESULTS CDU/CSU: 35.2% (225 seats) SPD: 34.3% (222) Free Democrats: 9.8% (61) Left Party: 8.7% (54) Greens: 8.1% (51) The coalition options Press ponders impasse

Mr Schroeder has also insisted that he has a mandate to stay as chancellor.

However, on Tuesday he said it was "inappropriate" to go into any coalition talks with "any form of precondition".

"It's about exploratory talks - a phase in which we must talk to one another about how one will bring about a stable government, which need at this time," he said.

Mrs Merkel's CDU was leading by 20 points in the opinion polls when Mr Schroeder called an early election about six weeks ago, but failed to translate this into a clear victory at the ballot box.

The BBC's Ray Furlong says the CDU vote confirms Mrs Merkel's authority within the party, for the time being at least.

But her rivals are circling - in particular a clique of powerful regional leaders, as well as those on the left of the party who are unhappy with her reformist agenda.

If she cannot form a government soon, her opponents within the party may try to remove her, our correspondent adds.

Backroom deals

A coalition deal must be reached before 18 October, the deadline for the new parliament to sit and choose a new chancellor. If there is no deal, the only way out would be a fresh election.

The liberal Free Democrats Party (FDP) - traditionally coalition allies of the CDU/CSU - came third, with 9.8% (61 seats).

Chancellor Schroeder appears confident of his position

The Left party, newly formed from disenchanted SPD members and former communists, took 8.7% (54 seats), and the Greens, Mr Schroeder's coalition partner, won 8.1% (51 seats).

There is speculation about a possible "traffic light" coalition - never tried before - between the SPD, Greens and the FDP.

FDP leader Guido Westerwelle ruled that out on Sunday, but he could face pressure to reconsider.