Germany faces stagnation after narrow election win

GERMANY faced the prospect of economic stagnation yesterday after Chancellor Gerhard Schroeder won Sunday's election with a reduced majority that narrowed his scope to implement painful reforms.

Schroeder said he would immediately start talks with the environmentalist Greens to resume the coalition that has ruled Germany for the past four years, as share prices across Europe fell amid disappointment about the election outcome.

After making criticism of the United States and its threat to attack Iraq a plank of his campaign, Schroeder made a first step toward mending fences by announcing the resignation of a minister who had been quoted as likening the methods of President Bush to Hitler's.