Additionally, every concession the SPD makes would be thoroughly exploited by the Left Party opposition and that spells disaster for the future of the SPD.  The SPD elite would be in limbo between demands of the CDU on one side and the need to preserve their own party on the other side.

An alliance between CDU and SPD could rely on a sound parliamentary majority, but it wouldn't be able to make clear decisions. This would result in a watered-down reform program, which would only cost Germany more precious time.

Sure, a broad-based reform coalition would be desirable in order to secure wide acceptance for necessary cuts. But this would require all those involved to display a willingness to accept what's necessary -- something that doesn't seem to be the case at the moment. Instead, Germany's voters and parties quite obviously still tend to indulge in collective self-delusion.

A lot of newspapers share this pessimistic view.  From the BBC's European press review:

[The Berliner Zeitung] dismisses [a grand coalition] as "nothing more than a product of the imagination of those who want to see change, but not too much of it".

Die Welt also believes that advocates of a grand coalition want primarily to preserve the status quo.

"Voters do not vote for a grand coalition, they get it if the result requires it," it says. "But those who regard it as a political goal want above all one thing: no change."

Of course, speculation about a grand coalition is not helped by SPD politicians publicly contemplating it instead of campaigning for their own party.  From the Spiegel's German Papers:

The most left-wing of Germany's major newspapers, die Tagezeitung believes the Social Democrats are now gearing themselves up for a grand coalition, and SPD ministers are positioning themselves accordingly to continue in office. The paper cites two leading social-democrat politicians, Hans Eichel (finance minister) and Wolfgang Clement (economics and labor minister) who both hinted over the weekend that they would be happy to partake in a grand coalition. Eichel said that such a coalition is conceivable in principle, whilst Clement suggested it "wouldn't be the end of the world".

In short, the paper says, "The entire SPD government team wants to carry on. Each of them is considering how they could keep their jobs under a Merkel chancellorship." After all, the major social welfare and tax reforms will be taken up by the conservatives in any case. So why not be part of the action? One thing is clear: Should a grand coalition materialize, the paper is certain that Schröder would refuse to take part in such an enterprise. "There will be no 'vice-Chancellor Schröder,'" the commentator sensibly predicts.

I'll go further and say that there will be no SPD finance or economics minister in a grand coalition either.  Eichel and Clements will have to go looking for a new job in any case.

The Süddeutsche Zeitung agrees.  Again, from the Spiegel:

"Many leading social democrats are more attracted by remaining a partner in government than by beginning the renewal of the party in opposition." Furthermore, "an astounding number of voters still believe that a partnership of conservatives and social democrats can soonest solve the country's problems."

But this would lead to compromises geared towards the lowest common denominator, the paper says.  The only justification for such a political formation would be to block the participation of the populist Left Party from entering government. "A clear solution would be preferable," the commentator concludes. "Merkel and Westerwelle [the liberals' leader], have insisted for so long that they could do better, and should now be given the chance to prove it."

I'd rather see the Left Party in the government than the CDU and the FDP ruling Germany the next four years, but only 10% of Germans agree with me and both the SPD and the Left Party have ruled out the possibility of a coalition.  The Left Party even wrote so much into their election manifesto.  But all bets are off on election night and there's still six weeks to go.