Negotiations for a second term of the red-green government began in earnest in Berlin on Wednesday, just three days after the country wrapped up its tightest election in history.

"We want to get to a good result fast," German Chancellor Gerhard Schröder said on Wednesday. "We want to further reform the country without abandoning our social fabric."

At Wednesday's meeting, leadership teams from both parties -- which are being led by Schröder and Green Foreign Minister Joschka Fischer --agreed to a negotiating timeline, which they said would focus on political policy areas. Any decisions on the composition of the next cabinet would happen at the end of the negotiations, which both the Social Democrats and Greens expect to conclude in time for the Greens' party conference set for Oct. 18. Further talks dealing with specific policy goals are set to convene on Monday.

Looking ahead to "four very challenging years"

Schröder and Fischer made few public comments on the negotiations Wednesday, but Schröder said a priority for the government would be to reinforce efforts to raise living conditions in the eastern states formerly belonging to East Germany to make them more equal to those in the west. He also said the first area of negotiation would be the government budget for the next four years -- a important area of policy for the Social Democrats and Greens, who have promised to balance Germany's federal budget by 2005.

Given the currently troubling state of foreign policy and the global economic downturn, Fischer said the government would face "four very challenging years." The fact that the coalition lost 39 of the seats it won in 1998 and will now hold only a razor-thin majority in parliament could also create hurdles for the new government.

Nonetheless, without the Greens' unexpectedly strong showing in Sunday's election, the Social Democrats and Schröder would not have garnered enough votes for reelection – a fact many analysts predict could lead to a fourth ministry post for the party.

But during the past few days, the Greens have played down the issue of cabinet postings instead saying they wanted to increase the scope of the ministries they currently run – including the consumer protection and agricultural ministry and the environmental ministry. An example of such additional competencies would be the transfer of the government's energy policies from the Economics Ministry to the Environmental Ministry in order to promote greater usage of renewable energies.

Green Party leaders have also said they would demand a continuation of controversial eco-taxes on energy and fuels beyond 2004. They also want the government to do more to promote renewable energy by, for example, slashing subsidies on uncompetitive coal production. Another issue of major controversy could be the Greens' call for an end to compulsory military duty.

The Social Democrats, meanwhile, want to put measures to cut unemployment and spark the stagnant economy at the center of the stage during the next four years.

"We need economic growth, we need more jobs," said Franz Müntefering, the incoming chairman of the SPD's parliamentary group. "And all this against the background of further consolidating the budget. So we are walking a tightrope requiring intensive and detailed discussions."

Despite the Greens powerful hand in negotiations, Fischer has asked members of his party to be reasonable in their demands. Citing what he called "old wisdom," he warned fellow Greens on Wednesday that "the early bird that falls out of the nest gets caught by the cat."

Political musical chairs in the opposition

Meanwhile, over in the opposition camp, the shakeup continued in the parliamentary group of the Christian Democratic Union and its Bavarian sister party, the Christian Social Union. On Monday, former parliamentary group leader Friedrich Merz announced he would step down from his post, opening the door for CDU Chairwoman Angela Merkel to take over the post, one of the most influential positions in the party. CDU/CSU politicians elected her to the post on Tuesday by an overwhelming majority.

Another post the party will seek a new candidate to fill is that of the Bundestag Presidium, a leadership committee which includes the parliament's president and four vice presidents. Rudolf Seiters, who represented the Union bloc on the presidium, is leaving parliament. News agencies quoting party officials reported that former CDU Chairman Wolfgang Schäuble, Erika Steinbach, a CDU parliamentarian and chairwoman of the Association of Expellees, and Ruprecht Polenz, the CDU's former general secretary, are being considered for the job.

Incoming party group chairwoman Merkel is also busy searching for eight new deputies to round out her parliamentary group. But on Wednesday, other party members warned that, despite her promotion to the important parliamentary role, it should not be assumed that Merkel will be the party's chancellor candidate in 2008.

"This isn't about power-grabbing," said Michael Glos, chairman of the CDU's state parliamentary groups. He said the next chancellor candidate would be the person with the greatest chances of winning.