GERMANY is heading for a damaging political stalemate, with opinion polls suggesting the outcome of Sunday’s general election is desperately close.

Gerhard Schröder, the Chancellor, who has been trailing in the polls since calling an early election in May, has narrowed the gap on Angela Merkel, his conservative challenger. Although his Social Democrats are unlikely to win, their late surge could deprive Frau Merkel’s coalition of Christian Democrats and Free Democrats of a majority.

Political analysts fear that if the latest polls are borne out in the election, the rival left and right-wing parties will be forced into an unworkable alliance, leaving Europe with a weak and ineffectively run country at its very heart.

Frau Merkel was adamant yesterday that there should be no such grand coalition. “It would just drive us into a standstill, a stagnant Germany,” she told supporters in her windswept home constituency of Stralsund in eastern Germany.

“She will be like a hotel guest trapped in the door of a lift, the leftwingers on the one side and the radical market reformers on the other,” Der Spiegel said.

The same message is coming from the Social Democrats as well as the small parties, the Greens and the Free Democrats. All would consider themselves losers if a coalition were formed. Herr Schröder would head for retirement since he could never serve under Frau Merkel, and the Greens and Free Democrats would be excluded from government.

Yet the political arithmetic is pointing Germany in this direction. The Christian Democrats would be the biggest party, with 42 per cent of the vote, according to a poll by Emnid released yesterday. But the Christian Democrats do not have enough backing to form a centre-right government with their partner of choice, the pro-business Free Democrats. Together the two parties score 48.5 per cent. That is exactly the same as the total support for the Social Democrats, the Greens and the Left party.

Unless the polls tip in Frau Merkel’s favour over the next three days, the Christian Democrats will have to grit their teeth and rule together with the Social Democrats. The election that was billed as a turning point for Germany — “full steam ahead for change!” was one of Frau Merkel’s slogans — is destined to disappoint the country’s European partners, who urgently want a German economic recovery.

“A grand coalition would be a very bad solution for Germany,” Jürgen Thumann, head of the Federation of German Industry, said. It would, he added, damage the country’s standing as an investment location.

There would also be direct consequences for centre-right politicians across Europe. Nicolas Sarkozy, France’s presidential hopeful, would find it difficult to fight on a platform of change if Frau Merkel, a political ally, was leading a lame coalition.

However, many voters in Germany appear comfortable with the prospect of a grand coalition. Five months ago Germans were convinced it was time for a change, and Frau Merkel enjoyed a 21 per cent lead in the polls. Now they seem to have lost their nerve. Some 36 per cent of Germans say they want a grand coalition.

In part, they have been scared off by the ultra-reformist credentials of Paul Kirchhof, the Christian Democrat candidate for Finance Minister.

There is a feeling too that a grand coalition could produce sensible compromises. The Social Democrats might accept loosening of job protection laws to help to cut unemployment if, in return, the Christian Democrats agreed to set minimum wages in some industries.

There is potential for creative horse-trading but Germany’s problems are deep seated. Moreover, there is no guarantee that a grand coalition could speed reforming legislation in parliament.

The only man who seems to be enjoying the prospect of a grand coalition is Oskar Lafontaine, the left-wing firebrand who used to be Finance Minister under Herr Schröder.

Red Oskar, as he is known, is head of the Left party and would in effect be the leader of the Opposition if the Grand Coalition came to power. He has strong anti-globalisation views.

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