INSIDE OUT: With Schroder just muddling through and the political establishment in paralysis, the stagnant German economy will drag the eurozone down

INSIDE OUT: With Schroder just muddling through and the political establishment in paralysis, the stagnant German economy will drag the eurozone down - The outcome from the German general election this autumn was the worst possible - for Europe as well as

by ANDREW NEIL, publisher of The Business and The Scotsman

The outcome from the German general election this autumn was the worst possible - for Europe as well as Germany. A victory for the centre-right's Edmund Stoiber would have heralded some modest supply-side reforms, but nothing to reverse Germany's economic decline. The re-election of centre-left Gerhard Schroder by a convincing majority might have let him tackle the deep-seated economic problems he ignored in his first four years.

But Chancellor Schroder held on to power by the skin of his teeth - and needs the support of the left-wing Greens to stay in office. This will make him even less inclined to do anything radical, lest it rock his leaky boat. It is a recipe for rigor mortis in Europe's biggest economy.

The result has dashed hopes that Germany's problems will be confronted.

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