Shattered Merkel Forced to Seek Coalition Partner

It was a result that nobody had quite predicted. After leading in the polls for months, Angela Merkel's Christian Democrat party failed to win a clear majority in Germany's general election, with the parliament hung and uncertainty over who would be Germany's next chancellor.

Even the most pessimistic polls had suggested that Mrs Merkel would win 41% of the vote. In the end, though, the party won 35.3% - three percentage points less than in Germany's last election in 2002 and one of its worst results ever. The upshot was to deprive Mrs Merkel of a clear mandate and leave no outright election winner.

For Gerhard Schröder's Social Democratic party, at 34.2%, the outcome completed a stunning comeback. Feted by supporters at the SPD's Berlin HQ, the chancellor said he had no intention of giving up his job. Instead, he said coalition negotiations would start today with all the other parties, except the new Left party.

Addressing subdued supporters last night, Mrs Merkel admitted things had not gone as planned. But she also said she would try to form a government. "What is important now is to form a stable government for the people in Germany, and we ... quite clearly have the mandate to do that. We would have wished for a better result. But we are the strongest party."

The two rivals were disputing who held the upper hand deep into the night. Told by an interviewer during a post-election television exchange that he could not be chancellor because he didn't have a majority, Mr Schröder shot back: "Of course I can. Nobody else can do it." He went on: 'The only loser is Frau Merkel."

Mrs Merkel insisted, meanwhile, that after a day or two the Social Democrats would wake up to the reality that she had the upper hand. Close up, though, she looked exhausted and close to tears.

The two rivals could work together to form a "grand coalition", though this has only happened once before, in the late 1960s, and was not a success. The true balance of power lies with Germany's smaller parties. The leader of the Free Democrats, Guido Westerwelle, told Mr Schröder he had no intention of joining him in a "traffic light" coalition with the Green Party. "Dream on," he said bluntly.

Mrs Merkel will almost certainly make overtures to the Green leader, Joschka Fischer. A coalition between the CDU, FDP and Greens is theoretically possible but unlikely. Mr Fischer said last night CDU policies were "cold" and "ecologically backward".

Mrs Merkel and Mr Schröder both ruled out any coalition with the Left party, led by Mr Schröder's bitter enemy Oskar Lafontaine. The Left party said it would not enter coalition talks with the SPD.

If no coalition can be agreed then Germany is likely to face fresh elections later this year or early next year. In the meantime Mr Schröder will remain in office as a caretaker chancellor.

Mrs Merkel's apparent failure to win a clear majority for her coalition is likely to disappoint Downing Street. With relations between Tony Blair and Mr Schröder in poor shape, British officials had hoped that Mrs Merkel would prove an ally in their attempts to reform the EU. This is now unlikely to happen. Early exit polls suggested that Mrs Merkel had done far worse than expected because of uncertainty over tax and social reforms.