Germany's two biggest parties, Chancellor Gerhard Schroeder's center-left Social Democrats and conservative challenger Angela Merkel's Christian Democrats, will meet for coalition talks on Thursday, a Social Democratic party official said Tuesday. The two parties have enough seats between them to form a government and put an end to the country's political stalemate. But they would have to overcome differences on policy and principles ranging from taxes and labor regulations to European Union membership for Turkey. A Social Democratic official, who declined to be identified because of the sensitivity of the issue, confirmed the meeting would take place after both parties met with their traditional allies first. A Christian Democratic official, also speaking on condition of anonymity for the same reason, confirmed talks with Social Democrats this week but did not specify a day. The news came as two prominent politicians from the left and right indicated that such a "grand coalition" would be the best way out of Germany's political muddle. But they disagreed on Merkel and Schroeder's clashing claims to become chancellor. Voters ousted Schroeder's ruling coalition of Social Democrats and Greens on Sunday, but withheld a majority from the Christian Democrats and their partners, the pro-business Free Democrats. The result has been a confused scramble for power. Social Democratic Interior Minister Otto Schily gave a nod toward a possible left-right government in an interview published Tuesday in Italy's Corriere della Sera newspaper. "The needle is oscillating more toward a grand coalition under the leadership of Schroeder," Schily said. Guenther Beckstein, interior minister in the state of Bavaria and a member of the Christian Social Union, the Christian Democrats' sister party, agreed that the coalition was the way forward. "For me, the given result must be a grand coalition under the leadership of Mrs. Merkel," said Beckstein, a candidate for Merkel's Cabinet had she won a majority Sunday. Aside from who would be chancellor, the two parties would have to overcome some serious differences. Merkel wants to cut the top and bottom income tax rates, while the Social Democrats want to raise the top rate on people earning more than 250,000 annually. Merkel would make it easier for small companies to fire people, and let companies out of regional wage agreements; the Social Democrats resist those changes. The Christian Democrats also oppose full European Union membership for Turkey, while the Social Democrats say Turkey joining is essential for European security. Meanwhile, Merkel moved to shore up support in her own disappointed party ranks Tuesday before going ahead with coalition talks later this week, asking the Christian Democrats to re-elect her as the party's leader in parliament. The vote comes after the party turned in a disappointing result under her leadership in the campaign against Schroeder, barely finishing first with 35.2 percent to 34.3 percent. She earlier had led by up to 20 points. Seeking re-election was a preliminary test of strength, and she was expected to run unopposed. The Social Democrats also scheduled a vote on their parliamentary leader, Franz Muentefering, also unopposed. In addition to the grand coalition, other possibilities included the so-called Jamaica coalition of right-wing Christian Democrats and Free Democrats, plus the environmentalist Greens, who line up left of center. Its name comes from the parties' colors (black, green and yellow), which match the Jamaican flag. Bild, the country's biggest newspaper, put a photo montage of Merkel, Greens Foreign Minister Joschka Fischer and Free Democrats leader Guido Westerwelle in dreadlocks on its front page. "Is The Jamaica Coalition Coming?" it asked. Another possibility is an all-left coalition between Social Democrats, Greens and the New Left Party, made up of renegade Social Democrats unhappy with Schroeder's pro-business reforms and former East German communists. Both Schroeder and Left Party leaders have ruled it out, but there remains speculation it could succeed through toleration by the Left Party, which would support it without directly participating by taking Cabinet posts. A top labor leader, IG Metall industrial union head Juergen Peters, endorsed Schroeder's bid to remain chancellor after seven years, and expressed support for an all-left government, although conceding it might be unrealistic. He concluded, however, that "Schroeder's chances aren't bad" to stay in office.