After the most protracted wrangling in its postwar history, Germany finally has a new government. Angela Merkel has prevailed in her insistence, fully justified electorally and morally, on leading the new grand coalition and becoming the first female Chancellor of the Federal Republic. But she has had to pay a heavy price for the removal of Gerhard Schröder, whose obstinacy was beginning to weary even his own supporters. The Social Democrats (SPD) will have eight Cabinet seats — as many as the Christian Democrats (CDU) and its Bavarian ally, the Christian Social Union. Even more galling, the SPD is to occupy key ministries where its influence will be potentially damaging, including foreign, finance, labour, justice and environment. By contrast, the CDU will see its power rest on such lightweight offices as agriculture, education and families ministries — hardly the best foundation for reform, even though the defence and economics portfolios have been thrown in.

The two immediate questions are: will this coalition be stable and coherent? And can Frau Merkel push through any of the changes urgently needed to reform Germany’s economy? Smiling wanly, she insisted yesterday that the economy would be her main focus and the new coalition stood for “new policies”. Already, however, she has conceded too much. The SPD has blocked her proposals for greater labour flexibility by reducing sector-wide bargaining by trade unions. It has vetoed some proposed CDU tax reforms. And so far it has agreed to cut a mere 2 per cent in Germany’s non-labour costs, which, at 40 per cent of gross wages, are among the highest in the world.

From its base in the labour and finance ministries, the SPD could effectively sabotage reforms proposed by Edmund Stoiber, the Bavarian premier, who will head the economics ministry. And Frau Merkel will find little room for manoeuvre or innovation elsewhere. Easing the most restrictive regulations pushed through by the Greens in the previous coalition, especially on nuclear power, will hardly be possible as long as the SPD controls the environment ministry. And hopes of a quick improvement in Germany’s rock-bottom relations with the Bush Administration will hardly be hastened by the appointment of an ally of Schröder as foreign minister.

Given these contradictions, the prospects of a stable coalition are slim. It may run without fatal conflict for a few months, as the SPD will want to demonstrate maturity and responsibility and show that the coalition is merely continuing reforms already begun by Herr Schröder. But when real change is contemplated, the SDP will be tempted back to populist politics and Cabinet wrangling will begin. Each side will then want to go to the voters to increase its power. Only the deluded can see a long period of political stability.

Frau Merkel has little time, therefore, to establish herself. Wounded by a lacklustre election campaign, she must prove to the CDU that she has steel in her spine. Rivals are already waiting for her to fail. To keep her grip on her party, she must move fast in areas where coalition agreement may be possible: cleaning up the budget, simplifying taxes and reforming pensions. Wrangling has wasted time. Frau Merkel must stride out in her Chancellor’s shoes. She may not be Margaret Thatcher, but she is in office.