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Germany has a new government. After weeks of grueling negotiations, a grand coalition of Christian Democrats and Social Democrats has emerged. Ms. Angela Merkel, head of the Christian Democratic Union (CDU) will take over as chancellor, presiding over a Cabinet in which the Social Democratic Party (SDP) actually holds more portfolios. That reflects the oddities of the election, and could spell trouble for Ms. Merkel and the country. Germany is deeply divided, which guarantees that the new government will be tentative and cautious, unwilling to adopt many of the reforms that the country needs.

In national elections held last month, Ms. Merkel’s Christian Democrats narrowly bested the SDP, winning (along with its sister party, the Christian Social Union or CSU) 226 seats to 222 for the Social Democrats. In the final results, the margin between the two parties was less than 1 percent of the vote. This was a bittersweet result for the CDU, as it had been projected to win by a large margin when the election was first called, in the spring of this year. Since then, the SPD, and Chancellor Gerhard Schroeder managed to close the gap between the two parties. That success reflected Mr. Schroeder’s personal charisma and Ms. Merkel’s wooden personality and clumsy campaigning. Germans became increasingly wary of the CDU agenda, worried that it would force them to give up many of the perks they had come to enjoy. Emboldened, Mr. Schroeder used his strong finish to press for a continuation of his term in office. He apparently hoped that he could exploit divisions in the CDU to undermine Ms. Merkel’s claim to the chancellor’s office. He failed. The CDU remained united and prevailed in negotiations to form the new government.

The new “Grand coalition” has Ms. Merkel at its head, making her the first woman, and the first former East German, to lead the German government. In exchange for the top post, the CDU claimed six Cabinet posts to the SDP’s eight. In addition, Ms. Merkel was also reportedly obliged to drop plans to tax bonuses paid for night-shift and holiday work in order to win agreement. Other retreats from her election campaign are expected. As one commentator noted, it looks like the CDU leader heads a Social Democratic government.

That might not be enough to actually form a government. The SDP has long been deeply divided between its own left and right wings, and the left is not happy with the accord. It has complained party negotiators gave too much away in talks with the CDU and members of the left wing have threatened to withhold support for the government if they do not get the Cabinet appointments or the coalition agenda they want. The two parties have given themselves until Nov. 12 to agree on a platform, but as many as 100 SDP legislators have threatened to vote against the government if they are not satisfied with the outcome of the negotiations.

The result is likely to be a government as divided as the SDP, with little stomach for the reform that Germany needs. Germany is an anomaly. It has one of the most generous welfare states in the world and one of the most rigid labor forces, yet is also the world’s largest exporting country. The result has been virtually zero economic growth and high unemployment, yet continuing comfort for those without work. Businesses had hoped that a new government would lift the heavy hand of the state and permit them to better compete. For them, Ms. Merkel was a 21st-century version of former British Prime Minister Margaret Thatcher, who brought wrenching reform to Great Britain. That image frightened the rest of the electorate, however, prompting the backlash that gave Mr. Schroeder hope he could stay in office.

Unfortunately, Germany cannot continue on its present course. It is living on borrowed money while other countries are developing the skills to make products every bit as good — and less expensive — than those made in Germany. Mr. Schroeder has acknowledged as much, but even his somewhat tepid reforms, embodied in a program called Agenda 2010, infuriated the left wing of the SDP. The left has dug in its heels as a result, dividing the party and the country, and ensuring that additional reform is exponentially more difficult to achieve.

This, then, is the situation Ms. Merkel has inherited. She has no mandate, she will preside over a fractious coalition — if the government ever wins a vote of confidence — and while German workers are fearful of what she might do, the business and financial communities are equally concerned about what she will not do. Neither can she hope to distinguish her government through foreign policy, as that portfolio has been claimed by the SPD. In several months time, she might be wishing she had not bested Mr. Schroeder after all.

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