Friedrich Hayek used to warn for “the muddle of the middle.” That, sadly, is the situation Germany will find itself in during the next four years. Last May, when Chancellor Gerhard Schröder called the elections, his socialist SPD stood at barely 28% in the polls while the Christian-Democrat opposition (CDU-CSU) of Angela Merkel polled at 47%. During the campaign Schröder made a comeback, but no-one had expected the final result of 34.3% for the SPD (38.5% in the 2002 elections) and 35.2% for the CDU-CSU (also 38.5% previously). The biggest winner is the post-communist Left Party, which jumped from 4.0 to 8.7% and from 2 to 54 seats in the Bundestag. Germany has definitely shifted to the left.

A center-right coalition of the CDU-CSU with the Liberals of the FDP has become impossible, despite the FDP gains (from 7.4 to 9.8%). A leftist coalition of the Socialists, the Greens (from 8.6 to 8.1%) and the Left Party is theoretically possible, but unlikely. Hence Germany will probably have to settle for a so-called “grand coalition” of CDU-CSU and SPD. Both parties are almosts equally strong, with 217 seats for the Christian-Democrats and 213 for the Socialists, and both Merkel and Schröder have already claimed the position of Chancellor. That will probably go to a Christian-Democrat, but the SPD will demand a high price, including, most likely, the Foreign Ministry. During the campaign the Socialists again (as in 2002) displayed their deep-rooted anti-Americanism. Rolf Schwanitz, one of Schröders senior ministers (who before 1989 used to be an assistant lecturer in law and economics in East Germany – and hence by definition a fellow-traveller of the communist dictators) campaigned with posters showing the coffins of American soldiers killed in Iraq and the slogan “She [Merkel] would have sent soldiers.”

In good shape?

Once again German reunification is to blame for the mess Europe’s most powerful country is in. If there had been no reunification a center-right coalition would have been possible in West Germany. That country could then have taken the lead in the long overdue welfare state reform Western Europe needs and which will not happen anywhere if Germany does not set the good example. If reunification had not taken place East Germany would not have been in a position to vote for unrepentant former communists who want to solve their economic problems at the expense of their Western cousins. If there had been no unification East Germany today would undoubtedly be one of the Central European “tigers” – those booming economies with their considerable liberalisation and their successful flat tax systems.

Today Schröder was able to target Paul Kirchhof, Merkel’s candidate for the Finance Ministry and an outspoken proponent of a flat tax, in a campaign of smear, ridicule and lies, telling voters that a flat tax would lead to a “social bloodbath” and is an unworkable theory – while eleven countries in central and eastern Europe have already succesfully adopted it.

The next four years are bound to be lost years, like the seven previous years under Herr Schröder. As The Economist wrote last week “in practice a grand coalition, led by a Chancellor Merkel weakened by her failure to win a majority, with an embittered SPD many of whose members believe that reform cost them the election, would be unlikely to produce much in the way of change. For Germany’s sake, and for the sake of reform right across the EU, voters should do their best to give Merkel’s Christian Democrats and their [FDP] allies a clear majority.”

The Economist itself, however, played a dubious role during the German electoral campaign by boosting Schröder’s record with a front page article on 19 August claiming that the German economy was in surprisingly good shape. The Schröder government was quick to cash in on this “enlightening compliment.” If Germany, as The Economist wrote in August, is “poised for a rebound,” yesterday’s election result probably does not matter. But remember that it was also The Economist that preferred the “incoherent” John Kerry over the “incompetent” George W. Bush last Fall. Its doublespeak on Germany leads us to wonder what The Economist is: incoherent or incompetent?