Mary Dejevsky: Hard bargaining ahead as Merkel's momentum fades

In a poll taken late last week, the proportion of German voters saying they favoured change dipped below 50 per cent (to 45 per cent) for the first time in the campaign; 51 per cent were opposed. This projection turned out to be more accurate than any of the party-based polls.

And the turnaround was sharp. Ms Merkel went from certain victory at the start of the campaign to a result where her CDU/CSU and their potential coalition partner together notched up only 45 per cent of the vote. The reasons will be the subject of many post-mortem examinations, but several are clear from the campaign.

First, Gerhard Schröder fought a brilliant and highly combative campaign. Some in his party had feared that, by calling the election early, he was throwing in the towel. In the end, he proved himself once again to be the SDP's greatest asset. Asked who would make a better chancellor, Germans registered a preference for Mr Schröder by as much as 10 per cent. If the campaign had been longer, it is possible he could have led his " red-green" coalition to a majority.

Second, Ms Merkel's decision to campaign hard on tax cuts could have been a vote-winner, but probably lost her votes in the end. The trouble was that the free-market FDP also advocated tax cuts and may have made inroads into that section of Ms Merkel's vote. Ms Merkel's appointment of Paul Kirchhof, known as Germany's "Mr flat-tax", also turned into a liability ­ largely because Mr Schröder managed to blur the line between Mr Kirchhof's views and CDU/CSU policy, and scare low-paid voters into believing they would be penalised. The SPD and the new Left party also seized on the New Orleans hurricane, arguing that it showed the bankruptcy of the US model of a low-tax, small-government state. A Merkel chancellorship, they charged, would destroy German social solidarity. Ms Merkel offered no adequate response.

A further, less tangible, reason was that Germans admire Mr Schröder and failed to warm to the less outgoing Ms Merkel. That, as one poll suggested, as much as 20 per cent of the electorate had misgivings about a woman chancellor also cannot be ruled out of the equation.

All that said, Angela Merkel still has a chance of becoming Germany's next chancellor, though not with the mandate for reform she had hoped for. And this would be a considerable achievement for a woman in the man's world of German politics and a woman who grew up in the former communist East.

If she emerges as the leader of the largest party, she will have first crack at forming a coalition. Last night, however, her CDU/CSU alliance was not assured even of the greatest number of seats. If the SPD ends up the largest party, Ms Merkel's early preference for a "grand coalition" with the SPD could dissolve. And, in that case, Mr Shröder has a good chance of remaining as Chancellor, with a "grand coalition" as one of a number of options. They include not only variations on a new three-party coaltion but the continuation of his "red-green" alliance as a minority government relying on the new Left party for support as and when.

His refusal to concede defeat last night was a judicious move, allowing him to keep all options open. And when he called the vote a "personal personal defeat for Ms Merkel", in at least one respect he was right. The CDU/CSU party won fewer seats this year than it did three years ago when the candidate was the CSU leader, Edmund Stoiber. In 2002 there were those who argued that had Ms Merkel been the candidate, she could have won. This time, both parties to the alliance, the CDU and the CSU, lost votes.

There was a new element in this campaign, however, that changed the dynamics perhaps more than had been expected. The new Left party won more than 8 per cent of the vote and guaranteed itself 50 or so seats in the Bundestag. The free-market FDP also did well, increasing its vote by 3 per cent, and the Greens, also against expectations, held stable. The two mainstream parties scored their lowest proportions of the vote ever.

Last night, party leaders were positioning for the hard bargaining to come. The one certainty is that, whatever its composition, Germany's next coalition will be more fragile and potentially discordant than the " red-green" government it replaces.