Germans have made their bed. Now what?

Yesterday's parliamentary election in Germany was an utter disappointment (except for the FDP).

Germany was plunged into uncertainty last night when the leaders of the two main parties claimed they could become chancellor after neither won a majority in the general election. The result was a blow to the conservative challenger, Angela Merkel, whose party started the campaign with a 21-point lead. Although Mrs Merkel could still become the country's new leader, she can now probably only do so as part of a "grand coalition" with Gerhard Schröder's Social Democratic party.

However this now seems unlikely as Schroeder has ruled a grand-coalition out. It would also make the CDU/CSU look bad when it results in minimal reform and gridlock. Absurdly every party seems to swear off every conceivable coalition, so unless there are new elections someone is going to have to do some backpedalling. John Fund has an excellent analysis.

The results mean that in retrospect Germany might have passed a tipping point about the time the country unified with its lost eastern states in 1990 after the collapse of communism. One out of five people in the new Germany now lives in the east, a region that massive subsidies and government intervention have failed to revive. The angry and frustrated voters there make different political choices than their western counterparts.
The Left Party, an amalgam of former East German Communists and erstwhile Social Democrats disaffected by Mr. Schroeder's tentative reforms of the welfare state, won over a quarter of the vote in eastern Germany. But neither major party is willing to go into coalition with them. So the nationwide showing of 8.5% by the Left Party has created the gridlock that leaves neither party able to form a coherent parliamentary majority to pursue its program. Without the votes cast in eastern Germany, the conservative coalition of the CDU and the pro-market Free Democrats would have won a clear majority.
The Christian Democrats thought they might appeal to easterners by putting forward Angela Merkel, a former physicist who grew up in East Germany and then became the rare outsider to climb to the top of national politics when much of the rest of her party's leadership was discredited in a campaign finance scandal in the late 1990s. But it turned out that many easterners viewed "Angie" not as the hometown girl made good but as a traitor for wanting to free up the country's barriers to laying off workers and also offering incentives to long-term unemployed workers who take low-paying jobs.
[...]
The result was a qualified disaster for the CDU. The Free Democrats, who did indeed advocate flatter tax with three rates of 15%, 25% and 35%, won their best result ever, taking 10% of the vote. But undecided voters swung away from Ms. Merkel. No poll during the campaign had had her party winning less than 41% of the vote, but the CDU wound up with only 35%, three points less than it had won in its losing 2002 race. It squeezed out the Social Democrats for the spot as the largest party only because the SDP lost even more votes to the splinter Left Party. The end result was no clear mandate for any party.
German voters may not again get quite as good a shot at installing a government that can bring about real economic reforms. Voters balked at real change at the last minute. In the words of economist Norbert Walter, "they wanted someone to wash their fur, but at the same time not get it wet." Most Germans understand that their country has to modernize in the long run, but, says Thomas Kielinger, a writer for the newspaper Die Welt, "when push comes to shove many are reluctant to go for the candidate who tells it like it is."

At this point, if I was German, I would hope for a CDU/CSU, FDP and Grüne coalition, though it would be very awkward to balance all their interests (and the Grüne have ruled it out). However I firmly believe that people deserve what they ask for and in this case a coalition of SPD, Grüne and Die Linke would be the ideal punishment (though the SPD has said several times it will not form a coalition with Die Linke). This would presumably return Schroeder to the Chancellorship while causing a left-wing lurch in his policies - as a result of Die Linke. Things need to get much worse in Germany before they can get better and no coalition promises economic disaster more than this one.