Schroeder hangs on

The inconclusive German result leaves open the possibility that Chancellor Gerhard Schroeder could remain in power after his stronger-than-expected showing.

Across central Europe, governments held their tongues, diplomatically insisting they hoped for good relations with the region's main trading partner regardless of who ended up in command.

But dismay at the result was palpable and even the prospect of a Christian Democrat leader Angela Merkel-led 'grand coalition' with the Social Democrats failed to lift the mood.

Nowhere was the disappointment more visible than in Poland, whose relations with Germany under Schroeder have reached the lowest point for years.

"The election result is terrible," said Civic Platform (PO) leader Jan Rokita. His party and its conservative ally, Law and Justice (PiS), openly praised Merkel and criticized Schroeder in the run-up to the German vote.

Both parties - but also the ruling left - were annoyed last year when Schroeder sought to force the new EU nations to align their corporate taxes with higher German rates in response to German companies shifting production to the east.

Polish-German relations were already strained when Warsaw and other central European capitals agreed to support the US attack on Iraq despite German and French opposition.

But it is Schroeder's friendship with Russian President Vladimir Putin that most irks Warsaw and the ex-Soviet Baltic States of Estonia, Latvia and Lithuania. Just days before the election Schroeder further angered Poland by finalizing a deal with Putin to connect Russia with Germany via a gas pipeline beneath the Baltic Sea, and potentially threaten the country's energy security. (Reuters)