BERLIN—Germany's electoral standoff moved from the inconvenient to the impossible Monday, as leaders of the country's four largest political parties spent the day primarily outlining whom they wouldn't work with in a future coalition government.
German Chancellor Gerhard Schroeder, whose Social Democratic Party came in second in Sunday's elections, with 34 percent of the vote, insisted that he should remain Germany's leader, while backers of Christian Democrat Angela Merkel, whose party won 35 percent, said she should lead a new government.
Political observers said the impasse might take weeks to resolve, a prospect that worries economists in a nation where unemployment is 11 percent and the economy has grown only marginally for years.
"Uncertainty at a time of economic crisis is our worst-case scenario," said Manuela Glaab, the head of the University of Munich-based Center for Applied Policy Research. "We need a working government to get Germany back on track. Every responsible politician has to understand that there is no time to lose."
Investors said they feared the deadlock would slow needed economic reforms, and European Commission President Jose Manuel Barrasso urged a compromise. "Without a dynamic Germany, Europe cannot recover," he said.
Others suggested that new elections are likely. If no government is agreed on by Oct. 18, when Schroeder's current term ends, new elections could be called.
The Christian Democrats had been expected to win Sunday. But missteps by Merkel and a hard campaign by Schroeder allowed the Social Democrats to close the gap, which polls had showed at one time to be as wide as 20 points.
The Christian Democrats won about 225 seats in Parliament while the Social Democrats finished with about 222.
Christian Democrat ally the Free Democrats got 10 percent of the vote, or 61 seats, while Social Democrat ally the Green Party won 8 percent, or about 51 seats.
Parliament will have at least 598 members—the number can change, based on Germany's system of proportional representation—meaning that one party must control at least 300 seats to form a government.
Leaders for the Green Party and the Liberal Party made it clear Monday that that goal was all but unattainable.
The Green Party said it wouldn't join any coalition that the Christian Democrats led. The Liberal Party said the same about any coalition that the Social Democrats led.
All sides have rejected working with a fifth group, the New Left, made up of former communists, largely from the former East Germany. It won 54 seats.
That leaves the possibility of a so-called "grand coalition" between the Christian Democrats and the Social Democrats. But Schroeder said Monday that he'd serve in such a coalition only as chancellor. Christian Democrats responded that they'd won more votes.
Such a coalition would be fraught with problems in any case, said Lutz Erbring, professor of communications at Free University in Berlin, as the two parties positioned themselves for dominance in the next elections.
The likely losers in such political maneuvering would be serious progress on economic reform measures, especially those aimed at creating more jobs and stabilizing government social programs.
"The reform program is not about the next few years, but being able to maintain our society for the next generation," Erbring said. "We may well lose years in the reform process, and we can't afford to lose any time."
The German stock market fell about 2 percent on the news early Monday, before recovering some to close down 1.2 percent.
German economic malaise was the theme of the campaign leading up to Sunday's balloting, and until recent weeks, Merkel and the Christian Democrats were expected to win a decisive victory over Schroeder, whose coalition has led Germany for seven years of little growth.
But many analysts said Merkel frightened German voters with calls for making it easier for small businesses to fire people and for increasing the value-added tax so that payroll taxes could be reduced for employers.
"It is clear that Germans do not want Mrs. Merkel as their chancellor," Social Democratic party chief Franz Muentefering said.
It wasn't clear, however, how Schroeder would be able to form a government, and many saw the likely delay as a disaster.
"The stalemate that emerged in the election is of course the worst result that you could have wished for, the worst for the interests of Germany and for Europe," Klaus Liebscher, a European Central Bank Governing Council member who heads Austria's central bank, said in Vienna.
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(c) 2005, Knight Ridder/Tribune Information Services.
GRAPHICS (from KRT Graphics, 202-383-6064): 20050919 Coalitions GER, 20050919 Election next, 20050919 Region results, 20050919 Final Germany
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