Germany’s hard-fought general election appeared to end in a virtual dead heat — probably the worst result possible for the country and for the cause of reform. After a stumbling campaign marked by gaffes and a wooden timidity, Angela Merkel threw away the early huge lead of her opposition Christian Democrats (CDU) and was last night neck and neck with Gerhard Schröder.

The embattled Chancellor put in a relentless final drive to rescue his Social Democrats (SPD) from inevitable defeat and, until the last, exuded brash confidence and a canny political ruthlessness. His effort paid off — but in doing so, he has made Germany ungovernable.

The early poll projections gave the edge to Frau Merkel. Her performance was far below both expectations and what she would need to be assured of becoming the country’s first female chancellor. The pro-business liberal Free Democrats, who form the crucial swing vote, were set to take over 10 per cent — well above expectations and a sign that at least voters understood the importance of reform. But this will not be enough to rescue the Christian Democrats: together, the two parties seem certain to have less than a majority.

After three years of economic stagnation and flailing foreign policy, Herr Schröder was undeservedly granted a temporary reprieve. His coalition partners, the Greens, held on, managing to win some 8.2 per cent of the vote. Together they may well have fewer seats than a coalition headed by Frau Merkel. But there is one additional and deeply disturbing factor. In the former East Germany, once Frau Merkel’s homeland but now voting decisively against her, the former Communists and their left-wing allies have won a huge protest vote, with around 8 per cent of the national total. This presents a dangerous and possible scenario: the SDP, unreconciled to the reforms and social security cutbacks Herr Schröder belatedly proposed, could be tempted to form a new three-party coalition, bringing back into government the maverick Oskar Lafontaine, who defected to the new Left Party, and dropping Herr Schröder.

For Germany, that would be a disaster. All talk of reform would go out of the window. Germany’s foreign policy, already marked by visceral anti-Americanism, would inevitably drift further in that direction. Leftwingers from the east and fundamentalists within the SDP would force a halt to even the timid reforms already begun. Germany would be economically hamstrung and politically at odds with its allies.

The more likely, widely discussed, alternative is a grand coalition. Favoured by about a third of all voters, this would bring the SPD into a conservative-led government headed by Frau Merkel. This, too, has drawbacks. The first is the precedent of history. Germany has had only one such coalition, headed by Kurt Kiesinger, of the CDU, which was Germany’s least effective government. The other problem is that opposition would become the preserve of the Greens or the Left Party, giving them a disproportionate influence. And finally there is the question of whether any administration headed by Frau Merkel would have authority or credibility after her terrible performance. Herr Schröder, if he has a modicum of principle, will take his party into partnership with her. But some on the Left will be advising a different course. A divided Germany is entering dangerous territory.