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 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.