West German federal election, November 1962

The federal election of May 1962 finally created a gridlock which seemed insurmountable. The left and the right were literally TIED. Neither the center-left bloc of the SPD and GVP nor the center-right-to-right-wing bloc of the CDU/CSU, FDP, and GDB had a majority of the seats in the Bundestag. Were Brandt to set out to form a left-wing government (consisting of the SPD, the GVP, and the DFU), it would literally have half of the seats in the Bundestag. At any rate, bringing the DFU into the government was unthinkable, and Brandt was categorically opposed to the mere mention of any cooperation with the SED's West German satellite. Were Erhard to attempt to break an even bigger taboo in West German society by inviting the all-too-openly Neo-Nazi German Reich Party to join the CDU/CSU, FDP, and GDB in a coalition, he would also have literally half of the Bundestag's seats.
The SPD had managed to gain a few votes which came primarily from the FDP. Mende's election as leader had not managed to prevent losses of middle-class, left-leaning FDP supporters who were turned off by Adenauer's blunders on the world stage (and saw the post-Bad Godesburg SPD as a better alternative) from switching to the Social Democrats. Brandtmania had helped to win them over, it would seem. Yet on the other hand, the Bad Godesburg program also alienated a few of the SPD's more left-wing voters, leading to a surge in support for the DFU, allowing it to cross the threshold for parliamentary representation for the first time.
Meanwhile, the CDU and CSU had managed to counter Brandtmania with Erhardmania, and stopped a massive drainage of votes which might have occured had Adenauer opted to lead the bloc again. Erhard campaigned as an economic mastermind and as an experienced government minister (as opposed to Brandt, whom he called an "inexperienced and illegitimate upstart.") He played heavily on questions regarding Brandt's background, as the latter was a working-class illegitimate child who had not only fled Germany for Norway during the Nazizeit, but worked for the Norwegian government and even briefly wore a Norwegian uniform. Not to mention his Norwegian wife (not that this is xenophobic, or anything). Erhard also managed to win at least a few right-wing FDP members who opposed Mende's ascension to the leadership of their party of choice, and feared he might throw his lot in behind the "foreign" Brandt. It was just enough to make up for a general flow of "Union"-ers to the far-right.
Even the GVP managed to gain a few middle class FDP voters who perhaps still had qualms about voting for a "Marxist" party. The FDP was the victim of a collapse which simply could not be prevented. Had Blücher not been ousted as the leader, the losses to the SPD would've been greater. It was simply doomed to be a bad election for the Liberals.
The All-German Alliance managed to surge to a point very near the 10% mark. The primary source of its new voters was the CDU/CSU, which had appeared to waffle on the Oder-Neisse question. Erhard's xenophobic attacks against Brandt may not have been enough to make up for the general perception among much of the far right that German Conservatism had been hijacked by the Western Allies.

Brandt was first given the mandate to form a government. He appeared to have two options: another grand coalition with the "Union," or a SPD-FDP-GVP government. The first option would be far more secure, as the "Union" was relatively united under Erhard's leadership, whereas Mende was having extreme difficulty in keeping his party together. Yet a deal with the CDU/CSU would likely be much more difficult to hammer out, and the partnership would be far more awkward. On the other hand, an SPD-FDP-GVP coalition would clearly have one dominating party, and would not be burdened by the inevitable awkwardness which would come about in the event of Brandt and Erhard sitting in the same cabinet. Yet getting the FPD on board would be quite a task, and Mende would have a difficult task were he to venture out to convince his party to join the SPD in a coalition. And even if he were to succeed, he'd have a very difficult job in preventing a split on the part of the Liberals (or his own ouster from the party's leadership).
Brandt first decided to risk the second option. He did not want to have to deal with Erhard so soon after the latter had echoed Adenauer's charges that Brandt was ineligible to hold public office due to his illegitimate birth. That Erhard was also more free-market oriented than Adenauer was also an issue. Upon meeting Mende, he was told that the FDP would still have a very averse reaction to any extensive domestic reforms enacted by the Brandt government. Foreign policy was also a very tense issue, and Brandt had to agree to drop his idea for a gradual easing of tensions with the East before even talking to Mende (who was virulently against the idea). Mende was also a free-marketer in his heart, and his differences with Adenauer had nearly all been based on foreign policy. In spite of long negotiations, Brandt was incapable of winning the FDP over–yet the process had lasted over two months.
Next, Brandt met with his rival, Erhard, and asked him if the CDU and CSU would be willing to join the SPD in a grand coalition. Erhard flatly told him that there was no chance he would do so unless all other options for a government were exhausted. The mandate to form a government then fell to Erhard.
Erhard managed to patch up the old wounds with the FDP rather quickly, and assured the GDB that he would stand "firm and proud" for "German territory in the East." Yet he would need to find a way to sure up enough support to make his government a majority one. He turned to the GVP (a CDU breakaway itself) and asked Heinemann to join his government. Heinemann told him that his party would be "open to it." And so the next round of coalition talks began.
Erhard was unwilling to allow for any disarmament, and his commitment to the NATO alliance was absolute. And in order to accommodate the GDB, he needed to keep tensions with the East where they currently were. It became clear from the off that Erhard could not manage to win the GVP over. The mandate was then withdrawn, and all-out cross-party talks began. This had taken two months as well.
The deal for a grand coalition was in the process of being hammered out for a month. The SPD was urging many progressive reforms which Erhard could not accept. The tension between Brandt and Erhard was also quite clear. Some recommended that a Social Democrat other than Brandt (i.e. Carlo Schmid) become Chancellor instead of Brandt in order to avoid the personal animosity that would arise with Erhard as Vice-Chancellor. Some even recommended that Gerhard Schröder, Heinrich von Brentano, or Franz Joseph Strauss become Vice Chancellor in addition. First, it was decided that the nuts and bolts should be hammered out.
It was agreed that this government would only last until 1963, but that a few reductions in sales taxes would be passed in addition to a few new housing projects, health care reforms, and other initiatives of that nature. It appeared that Brandt and Erhard might be able to tolerate one another after all.
It was moving in this direction until the fateful moment in October when U.S. President John F. Kennedy announced the discovery of Soviet missiles in Cuba. Adenauer had continued to serve as a caretaker Chancellor throughout this entire period, and now realized that he might be the last Chancellor of Germany. Knowing that the Soviets may attempt to hit another sensitive target somewhere else in the world in the case of a provocation or air strike (and Berlin was perhaps the most sensitive spot in the world), Brandt returned to Berlin and withdrew from the negotiations. Carlo Schmid took up the reigns as the leader of the SPD's negotiators (and would-be Chancellor).
A new government was agreed upon instantly. It would have only one purpose: to govern West Germany throughout the crisis and up to its end (should that end be peaceful). Sensing war, the CDU/CSU backed Schmid to become "Emergency Chancellor." Erhard would take the Vice Chancellory, and Struass the Defense Ministry. Brandt returned to West Berlin to a hero's welcome, and assured the city that he would not allow it to become a victim of Communist aggression. The "24-hour government," as it was known, was on high alert in Frankfurt throughout the entire crisis. Finally, on October 28, Soviet Premier Nikita Khrushchev announced that the USSR would dismantle its nuclear missiles in exchange for the American pledge not to invade or attack Cuba. The government in Frankfurt disbanded, the Bundestag was dissolved, and new elections were called.

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