German Vote Split, Parties Seek Coalition

German voters vented their anger toward mainstream parties Sunday and handed neither liberals nor conservatives a clear majority in parliament, leaving politicians to form a fractious coalition unlikely to quickly enact labor and social reforms intended to revitalize Europe’s largest economy.

The outcome was a searing setback for Angela Merkel, leader of the conservative Christian Democratic Union, whose party led in the polls for weeks and who was expected to be rapidly named the nation’s first woman chancellor. The election highlighted the political savvy of Chancellor Gerhard Schroeder, who rallied his flagging Social Democrats to within 1 percentage point of the CDU.

The results appear to have opened a new era in German politics as voters increasingly turn to alternative voices, including the new Left Party of ex-communists and defectors from the Social Democrats. With an unemployment rate of 11.6% and after years of sputtering economic growth, many Germans have become irritated with the policies of center-left and conservative parties.

The nation fell into a phase of limbo as both Merkel and Schroeder claimed victory Sunday night and began exploring alliances with other parties to control the roughly 600 seats in parliament. Preliminary results showed the CDU winning 224 seats, the Social Democrats 222.

Merkel is slightly favored to emerge as chancellor if she and the Social Democrats can agree to join together in a “grand coalition,” a move that could improve strained relations between Washington and Berlin over Schroeder’s opposition to the Iraq war.

“We are the strongest party and have the responsibility for forming the next government,” said Merkel, a 51-year-old physicist raised in communist East Germany. She conceded that the CDU had not fared as well as she’d hoped.

Thumbs up and smiling, Schroeder, 61, told supporters: “I have a mandate to ensure that in the next four years there will be a stable government in our country under my leadership. There will be no coalition under her leadership with my Social Democrats.”

Despite his party’s stronger-than-expected showing, Schroeder, often referred to as the “comeback kid,” is not expected to win a third term. Preliminary results showed that the Social Democrats received 34% of the vote compared with 35% for the conservatives. These were the lowest proportions either party had captured in more than 25 years.

The surprise winners were the pro-business Free Democrats, which garnered 10% of the vote, and the Left Party, drawing 8.6%. Both will probably play decisive roles in the new government.

“Today we can say our endeavor paid off,” said Oskar Lafontaine, who founded the Left Party several months ago. “We now know there will be leftist representation in the government.”

The voter turnout was 78% in this nation of 82 million.

The mood at CDU headquarters in Berlin was grim as the party attempted to fathom how it squandered the 20-point lead it held earlier this summer. The taciturn Merkel brought intellectual rigor and an aura of integrity to the race. But she was an unglamorous campaigner next to the charismatic Schroeder, who attacked the CDU’s flat-tax and pro-business agenda as “inhumane” to the country’s 5 million unemployed.

The race underscored Germany’s divisions between east and west, wealthy and working class. Since communism fell in 1989, Germany has undergone an uneasy reunification. Areas of the east are plagued with rusting factories and 30% unemployment. German workers in the west are among the world’s highest paid, but the country is struggling with globalization and a reluctance to forgo generous social-welfare and pension programs.

The path to Sunday’s vote was laid in May, when the Social Democrats lost control of the key state of North Rhine-Westphalia and Schroeder gambled by calling an early election to escape legislative gridlock over his inability to persuade the most liberal members of his party to support labor and social cutbacks. The conservatives quickly soared in the polls, but Schroeder gained last-minute momentum by attacking Merkel’s flat-tax proposal.

More so than in previous elections, voters became highly familiar with party platforms. “The voters were interested in content rather than faces,” said Klaus Staeck, a well-known poster artist who has campaigned for the Social Democrats since the 1970s. “People asked for party programs. I never experienced that before. Usually you have to talk everybody into taking one.”

Battles over trimming cradle-to-grave benefits have engulfed legislatures across Europe, including France and Italy, which recently imposed unpopular cuts in social and labor programs.

Corporations are demanding less government. In Germany, for example, nearly two-thirds of the $233 billion in annual tax revenue funds social entitlements.

“It’s high time to bring all those unemployed lazybones and enlist them into something useful instead of the state just feeding them,” said Katrin Link, a saleswoman in a tobacco shop who voted for the CDU. “There are too many people who just don’t want to work and still they get by wonderfully.”

The personalities of Merkel and Schroeder embodied their ideas. Suave and a master campaigner, Schroeder launched a program of moderate social funding cuts two years ago. But his media touch failed him and his message grew muddled. Many Germans, including those in his center-left party, thought the plan too ambitious, especially since Schroeder in seven years had had meager success in increasing employment or the size of the German economy.

The more somber Merkel argued that her proposal for deeper welfare cuts and weaker labor protections would be painful but would quickly improve the economy. Many Germans, according to last week’s polls, believed that Merkel offered the clearer vision. But Sunday’s vote indicated that Germans have yet to agree on a strategy to restore the economy and the country’s confidence as an emerging world leader.

“There is nearly no difference between the two large parties. It’s all the same. The promise of creating jobs is a massive lie,” said Olaf Groll, a retired university professor. “This is when the small parties become important. All I hope to trigger with my vote is a lively opposition in parliament. It’s time to talk turkey.”

Although the most frequently mentioned coalition formula would include the CDU and the Social Democrats, analysts predict such a pairing would be paralyzed by liberals attempting to block or temper Merkel’s reforms. The atmosphere could weaken the country’s stock market just as Europe is looking for a strong German economy to bolster the continent.

Merkel is expected to meet with Social Democrats this morning, but her bargaining power has been diluted by the CDU’s poor showing. The party’s results dropped 3.3 percentage points from three years ago, leading some analysts to suggest that the conservatives may dump her and put another candidate forward.

There was also talk of an alliance between the Social Democrats, the environmentalist Greens, who drew 8.1%, and the Free Democrats.

Hatun Bassad, a university chemistry student, said she voted for the Free Democrats. The Schroeder government, she said, has “steered the whole country into gridlock.... We need an economic boost.”

Investor Ekkehard Horn said the uncertainty over the new government meant one thing: “On Monday, the German stock market will decline by 500 points.”

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Times staff writers Christian Retzlaff and Petra Falkenberg contributed to this report.