A most un-German election

Germany's election last Sunday produced no clear winner with both Chancellor Gerhard Schröder and his challenger Angela Merkel claiming a mandate to form the next government. This is in fact exactly what the country didn't need - no overall winner, no obvious mandate for change and a cloud of uncertainty over the future economic course of the country. Germans value their stability and it is very rare for the electorate to produce a hung parliament with no coalition bloc receiving an overall majority.

The result was surprising in the sense that Mr Schröder's Social Democrats (SPD) managed to close the gap with the Opposition Christian Democrats (CDU/CSU) - a personal victory for the Chancellor and a very disappointing result for Ms Merkel. It is indeed amazing that when the electoral campaign took off the SPD trailed the CDU/CSU by close to 20 percentage points. The fact that the SPD only got three seats less than the Christian Democrats has earned Mr Schröder the right to be called the "comeback kid".

The electoral results are as follows: the CDU/CSU got 35.2% of the vote (225 seats), the SPD 34.3% (222 seats), the Liberals (FDP) 9.8% (61 seats), the Left Party 8.7% (54 seats), and the Greens 8.1% (51 seats).

Therefore it is no longer possible for the SPD and the Greens to continue governing alone, as they lost their parliamentary majority. However, the coalition hoping to replace the SPD and Greens - the CDU/CSU and Liberals - also failed to get an overall parliamentary majority, although they have more seats than the governing bloc. The two major parties will therefore have to find new coalition partners to form a stable majority in Parliament.

The big spoilers in this election were of course the Left Party, made up of former Communists and former SPD left-wing dissidents, who took a very respectable 8.7% of the vote. In the outgoing Bundestag the former Communists only had a handful of seats. This party surely played an important part in ensuring that no coalition bloc got a parliamentary majority.

This electoral deadlock explains why both Mr Schröder and Ms Merkel have claimed a mandate to lead the country. Even though the CDU/CSU did not fare well in the election - they actually lost about two per cent of their vote - they are now the largest party in Parliament. Furthermore the combined strength of the Christian Democrats and the Liberals make them the largest bloc in Parliament - the FDP did very well, nearly doubling its share of the vote. So one can very reasonably argue that Ms Merkel has the right to lead the next government, after all, the governing coalition did lose its parliamentary majority.

Mr Schröder's logic for wanting to remain Chancellor is less solid than his rival's. However, it is undeniable that the SPD's remarkable performance is due solely to Mr Schröder himself - his charisma, his excellent campaigning skills and his image as a statesman. In mathematical terms, one could argue that there exists a popular "left-wing" electoral majority against the type of economic reform suggested by the CDU/CSU and the Liberals - the SPD, Greens and the Left Party together got 51.1% of the vote. However, this is a somewhat weak argument - Mr Schröder has repeatedly stressed that he will have nothing at all to do with the Left Party and will not talk to them about a possible coalition.

During most of the campaign Ms Merkel was leading in the polls (by far) and was almost guaranteed a solid centre-right majority in Parliament, together with her Liberal allies. Instead, the CDU/CSU suffered its second worst result in its history and emerged only marginally ahead of the SPD.

On an individual basis, Ms Merkel was always going to struggle against the charismatic Gerhard Schröder. Unlike Mr Schröder, who would greet his supporters and warm up the crowd before addressing campaign rallies, Ms Merkel would go straight to the point and start talking about what needs to be done to get Germany's economy moving again.

Mr Schröder's campaign message was relatively vague - he stressed values such as solidarity and social cohesion instead of concrete plans, telling voters that whatever economic reform needed to take place would not cause pain if carried out by his government. Ms Merkel, however, gave details, some of which were not particularly popular with the electorate, such as her intention to raise the VAT rate by two per cent to finance a reduction in German employers' high social security costs and thus encourage more job creation.

Furthermore, the plan by the CDU's shadow finance minister, Paul Kirchof, to introduce a flat rate of income tax was exploited by the SPD as evidence that a Merkel government would punish the poor at the expense of the rich. The earlier comments about East Germans by Edmund Stoiber, the head of the CSU (CDU sister party in Bavaria) who heads the government in Bavaria, were certainly not helpful for Ms Merkel. Mr Stoiber suggested that people from the East were less intelligent than their Western counterparts and said that these "frustrated" voters should not be allowed to determine the outcome of the election.

This result is not particularly good for Germany which needs a strong government committed to reforming taxation, the labour market and the pensions and health system, reducing unemployment, boosting economic growth and cutting the budget deficit. There will have to be a new coalition in place which means that there will be plenty of horse trading. On a positive note Germany has a long history of coalitions at all levels of governments which have managed to forge common platforms that cut across the party divide.

There are a number of options for a new coalition government. The most talked about one is a "grand coalition" between the CDU/CSU and the SPD. Numerically speaking, this should be headed by Angela Merkel but Mr Schröder also wants to be Chancellor. Only one candidate can be Chancellor so this will mean the departure from the scene of the other candidate. If Ms Merkel is Chancellor, Mr Schröder will be out of the cabinet, and vice-versa. Such a coalition could work as there are many reformers in the SPD, although clear differences remain between the two parties on the level of economic reform needed.

Another option is the "traffic light coalition" (red, green, yellow party colours) which would see the Liberals (FDP) join the ruling SPD-Green coalition. The problem here is that the FDP's radical economic reform proposals have little in common with the policies of the SPD and the Greens.

A third option is the "Jamaica coalition" (the colours of the three parties) consisting of the CDU/CSU, the Liberals and the Greens. This is possible, as the Green Party cuts across the traditional left/right political divide, but there would be problems as the Greens could find it difficult to reconcile their policies on nuclear power and social welfare reform with the Liberals.

I have left out two other possibilities: a minority CDU/CSU-Liberal government and a Red-Red-Green coalition between the ruling SPD-Green government and the Left Party, both of which I think are very unlikely.