Hung House in Germany

Germany has not been able to elect itself a new government. The voters have been unable to decide which of the choices is the lesser of the evils on offer.

They had to choose between the alliance of the Christian Democratic Union (CDU) and the Christian Social Union (CSU) led by the challenger, Angela Merkel, and the alliance between the ruling Social Democratic Party and the Greens.

Ms Merkel had vowed to introduce the economic reforms that Germany badly needs. The country has an unemployment rate of over 14 per cent because its labour laws discourage investment, which is heading east to neighbouring places like the Czech Republic and Poland. But many Germans think they don't need reforms, because they will lose comfortable social security benefits.

The choice in this context was between slow reform of the kind already initiated by the personable Chancellor Schroeder, and the more radical treatment recommended by the less charismatic Ms Merkel, who had hoped that she would romp home on the strength of her message.

Certainly the polls suggested as much in the early days of the campaign, but then the mood began to swing. In the end, she has won only 225 seats in the 598-seat House, just three seats more than Mr Schroeder's party. And her vote share is only 35 per cent, just 1 per cent more than the Social Democrats. For Ms Merkel, this may well be an election that she let slip out of her grasp.

Since this is about as hung a parliament as you can get, the choice for Ms Merkel is of the kind that faced the Congress last year in India: to grab power by taking the support of people who might stop you from doing anything that you want to. But two can play that game. So it is expected that Mr Schroeder will offer something to the pro-market Free Democrats, who won a large share of the vote.

Ms Merkel is likely to do the opposite, offering something to the newly formed Left Party. This got 8 per cent of the vote and consists of former East German Communists and Social Democrat dissidents""who you would think are the CDU's least likely allies.

Meanwhile, Ms Merkel has said that as she and her alliance got more votes, she must form the government. But Mr Schroeder, who was expecting to lose, has been galvanised into saying, "It is clear that Germans do not want Mrs Merkel as their chancellor".

As Indians will recognise, this is tailor-made for arrangements that focus more on power sharing and less on policies and manifestoes. As in India, the fringe parties hold the whip hand.

There is talk of a Grand Coalition between Ms Merkel and Mr Schroeder, which has a historical precedent going back to the 1960s. If that happens, it would be like the BJP and the Congress forming a government""probably good for the country (or state) but not for the politicians.

Ms Merkel wants to be Chancellor and Mr Schroeder is saying "nein, nicht, verboten". His main message, a la Laloo, is: accept me as chancellor and I shall consider a Grand Coalition.

The net result could be a brief period of political uncertainty and then another election. The alternative is extended uncertainty and economic stagnation because of a policy stand-off.