The outgoing government was a coalition of the centre-left Social Democratic Party of Germany (SPD) and Alliance 90/The Greens, led by federal Chancellor Gerhard Schröder.

The government was generally expected to suffer a major defeat and be replaced by a coalition of the CDU/CSU and the liberal Free Democratic Party (FDP), with CDU leader Angela Merkel becoming chancellor.

Both Schröder and Merkel claimed victory, but the formation of a new government required careful negotiations, as no conventional arrangement could achieve a majority.

On 10 October, officials from both parties indicated that negotiations had concluded successfully and that they would form a coalition government with Angela Merkel as chancellor.

The CDU presented a platform involving increasing the pace and scope of economic deregulation in Germany and pursuing cuts in income tax and public spending (many commentators have compared Merkel with Margaret Thatcher).

The CDU began the campaign with a 21% lead over the SPD and confidence in Merkel's victory led the Prime Minister of the United Kingdom, Tony Blair, to meet with her ahead of Chancellor Schröder during a visit to Berlin in June.

[8] It called for strong saving measures in public spending and more room for local negotiation between employees and employers, as opposed to central control by trade-union officials.

Two of Germany's small far-right parties, the National Democratic Party (NPD) and the German People's Union (DVU), announced that they would run on a common platform in this election, raising fears in the mainstream German political establishment that together they might succeed in gaining more than 5% of the national vote and thus in entering the Bundestag.

Early election polls during summer 2005 from 6 organizations showed a solid lead for the CDU/CSU with a share of the vote ranging between 41% and 43%, and the SPD trailing at between 32% and 34%.

Reasons for this included conflicts about the election program in and between the conservative parties (the CDU and the CSU), and arguments with their preferred coalition partner, the FDP, as well as embarrassing gaffes.

[10] Further damage occurred when two prominent CDU/CSU candidates, Jörg Schönbohm and the CSU leader Edmund Stoiber, made insulting remarks about East Germans.

Predictions suggested that the opposing bloc of incumbent Chancellor Gerhard Schröder's ruling Social Democrats, the Greens and the country's recently formed left-wing Left Party (PDS/WASG alliance) would win a combined total of only 46%.

The leaders of the SPD and the Greens, Schröder and Fischer, as well as the Left Party's front-runner Gregor Gysi said they opposed the idea of a "red-red-green" coalition.

On Sunday 4 September, Schröder and Merkel met in a head-to-head debate which was broadcast by four of Germany's major private and public television networks.

Although most commentators gave the initial edge to Merkel, polls soon showed that the general public disagreed and ranked Schröder the clear winner.

On the eve of the election, the CDU enjoyed a 9% lead over the SPD (42% and 33% respectively), albeit with neither party likely to have enough seats (even with their preferred coalition partners) to form a government.

The error was attributed to factors including the large number of undecided voters (up to 40% ahead of the election) and the increasing inaccuracy of traditional telephone-based survey methods.

Voters in one constituency in Dresden had to wait until 2 October to vote in order to allow the reprinting of ballot-papers after the death of the National Democratic Party candidate on 8 September.

In the Elefantenrunde (elephant round) programme on election night featuring all party leaders, Schröder, in a memorable performance, insisted he had won on the basis of how far behind the SPD was in pre-election polls but managing to close the gap with the CDU/CSU to just one percent.

[15] The exclusion of the Left Party reduced the possible coalitions to the following three arrangements: Despite some prominent members publicly blaming Merkel for its poor showing, the CDU/CSU confirmed her as leader on 20 September.

[16] On 22 September, following Schröder's election night comments, SPD members began musing that the political system should consider the CDU and the CSU as separate entities rather than as a single parliamentary faction.

One SPD legislator indicated he planned to introduce a motion in the Bundestag explicitly defining the CDU and the CSU as separate parties.