After the drama of election night, it is back to business now that the results are known. The first casualties have already fallen: Herta Däubler-Gmelin is out as justice minister, and Jürgen Möllemann has resigned as second in command at the FDP. Good riddance to both. (Däubler-Gmelin actually lost in her own constituency in the university town of Tübingen, but she still made it back into parliament via the SPD's list. It does show that her comments were not well-received. It's a small consolation.)

Here's an overview of the winners and losers:

WINNER (and loser): The SPD and Gerhard Schröder. They've obviously won in the sense that they're still in power, and in the end that's probably all that counts. On the other hand, they've lost votes compared to four years ago which is also going to shift the balance of power in the governing coalition.

LOSER (and winner): The CDU/CSU and Edmund Stoiber. The inverse of the SPD. More votes, still out of power.

WINNER: The Green Party. This comes as something of a surprise, given that they weren't doing all that well in the polls, and some months ago they were even in danger of not making the 5% hurdle for parliamentary representation. Now they've gained votes and will have a bigger say in the governing coalition. With their deeply-rooted anti-Americanism and utopian environmentalism, this is not exactly going to steer the government in the right direction.

LOSER: The FDP. Again, the inverse of the Greens, as they were doing OK in the polls, and some months ago had a real shot at breaking above 10%. But they blew it, and Möllemann is in large part to blame with his anti-semiitic remarks. But culpability also falls on Guido Westerwelle, who should have gotten rid of him at the first incident, but failed to do so. I think the FDP has missed an historic opportunity for them to expand their voter base in this election. Economically, the FDP was the least bad of the major parties. Let's see where this defeat takes them.

The majority for the Red/Green coalition is very slender indeed. With just a few seats separating the the two blocks, and the shift in the center of gravity within the coalition to the left, this is going make governing a lot harder, as the threat of dissident MPs will hang over the government. Voting against the party whip is fairly rare in continental European politics, unlike in the US. But that's another post for another time.

PREDICTION: This government will not last the full four years of its term. With the only other possible coalition being the "Grand Coalition" of CDU/CSU and SPD, this is likely to mean early elections. (I suppose CDU/CSU and Greens is numerically though not politically possible).

Voting patterns were interesting too. There was a clear north-south divide, with the more prosperous south voting for the CDU/CSU, while the poorer east and north went to the SPD.

SO WHAT'S NEXT? More stagnation. The new government is unlikely to be more reform-minded than the old one, despite its new electoral mandate. True, they've made some small improvements to the pensions system in the last four years, but they're nowhere near enough. And this will yet again be a government that is viscerally ignorant of economic policy; generating economic growth is however the biggest challenge. With four million unemployed (a rate of about 10%) Germany desperately needs more economic growth and more jobs. Without the critically important reform of the stultifying labor market, job creation will remain a pipe-dream. This is also the tenor of the reactions from the business world. The need for deep structural reforms is urgent. They won't happen, because many of the reforms will offend the core Red/Green constituencies, and with a small majority in the Bundestag, pushing the legislation through is going to be difficult. Moreover, the CDU, CSU and FDP have a working majority in the upper house, the Bundesrat, which can block certain types of legislation. Usually I like gridlock, because it means politicians won't be able to screw things up very much, but in this case it will be bad for Germany. More lean years ahead.

UPDATE: American Kaiser has some analysis here. More at Shark.