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Last Updated: Friday, 30 September 2005, 19:47 GMT 20:47 UK
German rivals vie to win Dresden
Christian Democrat (CDU) candidate Andreas Laemmel campaigning in Dresden
Campaigning again: The national result disappointed the CDU
Germany's rival leaders Angela Merkel and Gerhard Schroeder have carried on campaigning in Dresden, where a delayed election is in the national spotlight.

The Dresden vote on Sunday is seen as a key test of popularity after Germany's inconclusive general election.

The death of a far-right candidate had delayed the vote in the eastern German district from 18 September.

Mr Schroeder's Social Democrats (SPD) and Mrs Merkel's Christian Democrats (CDU) are edging towards a coalition.

The two leaders have held exploratory talks - but each is insisting on the right to be chancellor.

1. Christian Democrats/Christian Social Union (CDU/CSU): 225
2. Social Democrats (SPD): 222
3. Free Democrats (FDP): 61
4. Left Party: 54
5. Greens: 51

Mrs Merkel's CDU and their Bavarian allies - the Christian Social Union (CSU) - currently have 225 seats in the new parliament, while the SPD has 222.

Campaigning in Dresden, Mrs Merkel attacked her rival's record in seven years of government, saying Germany needed "new policies" to counter job losses.

"When the polling stations close in Dresden, I am certain that the chancellor will gradually see that too," she said.

Meanwhile, Mr Schroeder accused Mrs Merkel of spreading pessimism and said Germany needed his party back in power to pursue its policies, particularly economic reforms.

He told supporters: "It is important that the Social Democrats become stronger."

In the last election in 2002, the Dresden district elected a CDU politician by a narrow margin.

'Getting closer'

Under German electoral law voters cast two ballots - one for a directly elected candidate and another for a party list. This means a voter can in practice cast ballots for two different parties.

As the election race this time is unusually close, the Dresden vote could produce a significant shift, as Bundestag (lower house) seat allocations depend on both types of voting nationwide.

Economy Minister Wolfgang Clement of the SPD was optimistic on Thursday about the prospects for a "grand coalition" with the CDU.

"We are getting closer together. We are overcoming the differences that divided us during the election campaign. We are on the way to finding common points," he said.

The BBC's Ray Furlong in Dresden says there seems to be general agreement that coalition negotiations will speed up once the by-election is over.

A rumour that Mr Schroeder will announce he is stepping down after the ballots are cast has been strongly denied by his party, our correspondent adds.

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