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. Last Updated: 07/27/2016

EU's Future Hangs in the Balance in Berlin

After the drama of the German election comes the time for the eating of words. This is not just true for the many outsiders who wrote off German Chancellor Gerhard Schröder too soon. His barnstorming election campaign means that he cannot be dismissed just yet. It also applies to Germany's political leaders who will now have to swallow some of their adamant attitudes if a coalition government of any sort is to emerge.

The bad news is that the German Bundestag is going to be more hamstrung than even the most pessimistic forecaster predicted. With only a whisker between the opposition Christian Democratic Union and Schröder's ruling Social Democratic Party, and no fewer than three minority parties holding the balance of power, neither of the preferred coalitions of center-right or center-left will have an absolute majority.

The good news is that Germany has more experience of forging coalitions than any other European country. The process of negotiating a common program across deep party divides is a well-trodden path. But even so, this one seems likely to take at least the 30 days before the Bundestag is required to reconvene.

As leader of the largest party, Angela Merkel must surely be given the first chance to form a government. Neither she nor Schröder likes the idea of a "grand coalition" between their parties, and the latter has flatly ruled out any such arrangement with Merkel at its head. He certainly would not be SPD leader in such a deal.

A coalition among the Christian Democrats (including their Bavarian allies), the liberal Free Democrats and the Greens cannot be ruled out. They share a common interest in tax reform. The Greens have no ties to trade unions, and therefore are more open to labor market reform. But Joschka Fischer, the Green party leader, says he will not enter such a coalition.

On the other side, a so-called "traffic-light" coalition (red, green and yellow) of the SPD, Greens and FDP, would be stymied by the liberals' insistence that they did not fight the election to keep Schröder's red-green coalition in power.

The essential elements in any coalition program are clear: reducing unemployment, boosting economic growth, curbing the budget deficit, and reforming taxation, the labor market, pensions and the health service. It is a matter of how, not whether, such priorities are tackled.

Foreign policy differences will be secondary. Getting the domestic economy moving is paramount, not just for Germany, but for the rest of the EU. On that score any new German coalition will be judged.

This comment first ran as an editorial in the Financial Times in longer form.