The expected triumph of conservative leader Angela Merkel did not materialize. Instead, her Christian Democrats finished only a fraction ahead of Chancellor Gerhard Schroeder's center-left Social Democrats. The result is a confused political landscape unlikely to produce a strong government.
Not only Merkel and her party colleagues are crestfallen. In Brussels, European Commission President Jose Manuel Barroso had been hoping for a sweeping victory of the pro-free-market Merkel to support his own stalled plans for liberalization across the union.
In London, British Prime Minister Tony Blair was likewise planning an alliance of interests with Merkel to propel his promise to reform the EU along the lines of the free-market model he has created in Britain.
But with the British presidency of the EU already three months old and near the halfway point, analysts say there has been only a deafening silence from London, and continued inactivity from Brussels.
And with no landslide victory for Merkel, this inertia is not likely to change.
Richard Whitman, a senior analyst at the London-based Royal Institute of International Affairs, says that enthusiasm for change appears to be fading in Britain, which is anyway often at odds with its EU partners.
"I think the British presidency is going to end up being the quiet presidency, partly because, in the big issues that need to be resolved, the UK is part of the problem, not part of the solution," Whitman says.
Whitman estimates that the EU has been adrift since France and the Netherlands rejected the new European constitution earlier this year. EU leaders subsequently could not agree on a new budget at an acrimonious summit. Now the British presidency is proving unadventurous, and the indecisive German election is only making things worse.
Given the circumstances, Whitman does not view Barroso and his Commission as the ideal group to reinvigorate the EU.
"It is essentially a pragmatic Commission; it is approaching lots of issues pragmatically. But that is probably what you do not need at the moment, in the absence of leadership from some of the big states. An animating Commission president would really be more useful," Whitman says.
Another senior analyst, Marco Incerti of the Center for European Policy Studies in Brussels, points out that Merkel's comparative failure has confounded predictions of the rise of a constellation of EU pro-free-market leaders, including Merkel, Blair and ambitious French presidential hopeful, Interior Minister Nicholas Sarkozy.
"Political observers proved to be wrong, not only in Germany but also in France. In June and July everyone was talking about Merkel and Sarkozy as the new 'dynamic duo' on the European scene. People were having talks with them as though they were already in power, and it was expected that their arrival in power would also mean the enlargement of a [new, liberal] Franco-German axis to include the U.K. and generally all of the larger EU states," Incerti said.
But now Merkel has not won a clear majority, and Sarkozy appears to be losing his gloss as a presidential candidate in the next French election, as the more centrist Prime Minister Dominique de Villepin gains in profile.
France, like Germany, has many voters who appear determined to oppose pro-globalization reforms seen as threatening their security and standard of living.
Schroeder's determination to stay in power in Berlin also means the severe wounds caused by the dispute over the war in Iraq could remain unhealed in Europe.
Schroeder pursued a strongly anti-interventionist line on Iraq, which, like that of French President Jacques Chirac, set a course against the pro-American policy of Blair in support of the invasion.
Merkel is closer to Washington, and if she gets to lead a new government, an improvement in U.S.-German ties can be expected.