He had hoped to relaunch reform of the European economy by striking a partnership with a new German Chancellor. But Angela Merkel’s failure to win a convincing election victory has dealt a heavy blow to those prospects.Behind the scenes the UK has been holding bilateral talks with other governments on the EU financing deal for 2007-13 and the British plan is to come up with a proposal in November, concentrating negotiations into the final weeks of the presidency culminating in a December summit.But several ex-Communist countries have made it clear they will raise the issue at Hampton Court unless they are satisfied it is being given urgent attention. Almost halfway through the six-month term, the former French president, Val? Giscard d’Estaing, has said the British presidency was achieving “very little”.

However M. Giscard conceded on BBC Radio that the lack of achievement was “not due to the British Government” but to “the system”, and most diplomats said it was premature to judge a presidency which has had little time to work due to the summer break.British officials in Brussels rejected the charge of inactivity, pointing to the complex negotiations under way to try to secure the start of EU membership talks with Turkey on 3 October.Nevertheless, interventions yesterday underlined concern about the deadlock over the EU’s future financing package which was blocked in June.

But the Greens remained divided on the issue.The radical Left Party appeared to have dropped its outright opposition to backing Mr Schr?’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 Schr? has ruled out any alliance with the Left Party.. Tony Blair faces new pressure to compromise on the British budget rebate and clinch a deal on European Union funding, as the UK’s presidency of the bloc came under fire for inactivity. 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. Italy signed up to the system, a day before Osman’s arrest, the Home Office said.Three other alleged would-be suicide bombers have been charged in the UK over the failed bombings.

They are Ibrahim Muktar Said, 27, of Stoke Newington, north London, Ramzi Mohammed, 23, of North Kensington, west London, and Yassin Omar, 24, of New Southgate, north London. Several observers had predicted that initial coalition talks between the two rivals would end in deadlock, so yesterday’s outcome came as a surprise. The result, which gave Ms Merkel’s party a mere 0.9 percentage point lead over Mr Schr?’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 Schr? for the post. Both sides agreed to resume discussions next week.But analysts remain deeply sceptical about the viability of a grand coalition. 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.

“We are a long way from negotiations, but we have opened the perspective for concrete talks.”Mr Schr?, 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. “Everyone is well aware that all parties bear a great responsibility to form a stable government as quickly as possible,” he said. “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 Schr? remain Chancellor. Mr Schr? 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. 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.

Prosecutors launched an investigation on charges of hooliganism in last week’s incident. Vitebsk is best known outside Belarus as the birthplace of painter Marc Chagall.. Germany inched a fraction closer to ending its political stalemate after Chancellor Gerhard Schr? and his conservative rival Angela Merkel agreed to continue talks on forming a grand coalition government after last Sunday’s inconclusive general election. In the previous incident on 14 September, a homemade bomb – a beer can stuffed with nails and metal scraps – was planted in a flower-bed near a bus stop close to a theatre That blast wounded two people. Investigators did not discuss possible motives for the attack, but the location suggests a business dispute could not be ruled out as a cause. The Belarusian Security Council said it was looking at several scenarios, including a fight between criminal gangs and hooliganism, the RIA-Novosti news agency reported.It was the second such explosion in the town, 300 kilometres northeast of the capital, Minsk, in just over a week.