Germany’s mess

ON GERMAN TV, the Berlin restaurant owner said post-election confusion was quite normal back where he came from, in India. The politicians would sort it out eventually and form some kind of coalition government, he reassured the reporter.

“Well, that's interesting — Indian conditions!” commented the fiercely competent in-studio anchor, with unconscious condescension. Her tone implied: Have we really sunk so low? Indian conditions, here, in Germany?

To which I would say, if only.

If only Germany had anything like the economic dynamism of the world's largest democracy — a democracy, incidentally, slightly older than that of the Federal Republic of Germany. India's growth rate over the last 12 months was 7%; Germany's was 0.6%.

The result of Sunday's German election — in which neither Chancellor Gerhard Schroeder nor his conservative challenger, Angela Merkel, received a clear majority — will not help to close that gap or to address the chronic problems of stagnation and mass unemployment in what is still Europe's largest economy. We are in uncharted territory, with both leaders of the two main parliamentary parties using the inconclusive vote to stake a claim to lead a coalition government. Germany's meticulously crafted constitution lays out a series of stages by which, over the next couple of months, the parties can attempt to form a coalition government. If it doesn't work, the president can dissolve parliament and call a new election.

In my view, that would be by far the best outcome. The process would waste months. But any likely coalition government will waste even more time — it would involve extraordinarily painful compromises on policy and would be plagued by personality clashes and parties jockeying for position in an election that everyone will expect to come sooner rather than later.

The results in economic and social policy — and probably in foreign policy too — will be more of that soft fudge in which German attempts at reform have been drowning for more than a decade. This will be bad for Germany, bad for Europe and bad for the world economy.

The most likely fudge factory would be a so-called grand coalition between the two main parties. Yet, for starters, Schroeder (Social Democrat) won't serve under Merkel, nor Merkel (Christian Democratic Union) under Schroeder, so a double decapitation would be needed before the grand coalition could even begin. With the parties having diametrically opposed policies in areas such as healthcare reform, fudge mountains would be called for.

The last time there was a grand coalition, from 1966 to 1969, it prompted a strengthening of the opposition — left- and right-wing extremes. A distinguished historian of modern Germany, Harold James, argues that another time when Germany had a similar coalition was 1928 to 1930. Its disastrous effect, under the impact of the Great Depression, was to send voters in herds to the communists and the Nazis, hastening the end of the Weimar Republic.

Though few people are suggesting a grand coalition today would have anything like the same disastrous consequences, it could represent an unsteady transition between one reasonably stable coalition government and another, as happened in the late 1960s. In which case, better to shorten the agony with a new election.

There's always a danger of over-interpreting such a result. If Merkel had been a more effective television performer, and her campaign had not been compromised by a flat-tax proposal that many Germans found threatening, I might now be explaining why the Germans had voted for change. Moreover, the party that saw the largest increase in its share of the vote, the Free Democrats, was the one that most clearly favored free-market economic reforms. Nonetheless, the net effect of this election can be summarized as a nein to the free-market reforms for which German business leaders have been pressing.

That nein joins the French non in the referendum that killed the European Union's constitutional treaty earlier this year: Nein and non to neo-liberalism, to any radical change to the old “social market economy”; nein and non to innovation, risk, immigration and Turkey's membership in the EU; nein and non to the U.S. That is the characteristic Franco-German refrain today.

For half a century, France and Germany together have been the motor of European integration. Now, however, the motor has become the brakes. This election is just one more proof of what we have seen for some time. The so-called Lisbon agenda of economic reform is stalled. The EU's always vainglorious claim that it would be the world's most competitive economy by 2010 looks ever more absurd.

In these circumstances some, particularly in Britain, will call for European countries with more competitive economies to throw off the Franco-German brakes: Let's simply make our own profitable way in the world. This is shortsighted advice. Where there are economic giants, with the U.S. and Japan being joined by China and India, dwarfs do not have a rosy future. Though Britain, France and Germany are still among the world's largest economies, their growth rates make them at best shrinking giants.

Only Europe as a whole has the capacity to hold its own in such a world. So this is no time for schadenfreude. All Europeans need the sick men of Europe — Germany and France — to recover almost as much as the French and Germans do.

•TIMOTHY GARTON ASH is professor of European studies at Oxford University and a Hoover Institution senior fellow.