The grand coalition has had its day

Peter Strieder, SPD regional head

The left-wing Social Democrats (SPD) voted on Thursday to withdraw from its 10-year coalition with the Christian Democrats (CDU) after late night talks on Wednesday ended without a deal.

The crisis was sparked after the collapse of a bank part-owned by the city added to Berlin's already massive debts.

The SPD has called for new elections to be held in the city.

'No trust'

Leading SPD politicians said after Wednesday's crisis talks that the coalition had no future.

"The grand coalition has had its day," said Peter Strieder, regional head of the SPD.

Mayor Diepgen says the SPD is shirking its responsibilities

There was, he said, no trust left between the parties.

But Berlin's CDU mayor, Eberhard Diepgen, said the SPD had not contributed constructive proposals to the meeting and had already decided to withdraw from the city government before it went into the talks.

"Parts of the SPD have been preparing a change for weeks and want to work together with the current [former communist] PDS and Green opposition," he said.

Even with a strong showing in new elections, the SPD cannot govern alone, and has reportedly been holding talks with the former communists to form a temporary coalition.

"It makes no sense 11 years after German unity for there still to be a taboo. It can't be right to say we won't work with a party that gets so many votes," said the SPD's schools senator, Klaus Boerger.

CDU general secretary Lawrence Meyer said such an alliance would be "scandalous", only 40 years after the Communist East built the Berlin Wall and split the city.

Billion-dollar debt

Mayor Diepgen accuses the party of shirking its responsibilities in the face of the financial crisis and using early elections to overturn the SPD's poor showing in the 1999 state elections.

Berlin's already shaky finances were dealt a blow last month when the Bankgesellschaft Berlin, in which the city holds a 57% share, revealed a massive hole in its financing.

The losses accumulated from its loans to finance rebuilding work in Berlin after reunification.

The city government said it would have to add $2.6bn to its already large debts to cover the shortfall.

Cuts are expected to be felt across the city.

Berlin's many outdoor swimming pools might stay closed this summer in preparation for privatisation.

And the city's arts lovers are preparing for yet more austerity measures.

British conductor Sir Simon Rattle has made his taking over of the philharmonic orchestra conditional on a massive injection of cash.

This now seems highly unlikely.

The city has to find $800m next year alone if it is to keep itself solvent.