The failure of Chancellor Gerhard Schroeder to win the early elections he initiated has been attributed, rightly, to his economic policies, which amounted to a rollback in welfare and a loosening of state restrictions on business. The German electorate simply could not accept that Schroeder was delivering the inevitable - tough adjustments that will be forced on them one way or another because of new global conditions beyond Berlin's control. And so millions of votes indispensable to Schroeder's reelection bid went to the new Left Party, the successor to East Germany's former Communist Party, which called for even more spending and state protections. The resulting shakeup in Germany's political map meant the end of the line not just for Schroeder but also for his popular foreign minister, Joschka Fischer of the Green Party. Since Schroeder was defeated largely because of his attempt to reform the country's ailing economic and social system, many in Germany and abroad assume that Berlin will have to abandon his ambitious project, dubbed "Agenda 2010." On the other hand - according to conventional wisdom - no changes are likely to occur in the field of foreign policy, where Schroeder enjoyed unshakable popular support. Both assumptions are wrong. Willy-nilly, Germany is about to continue the reform process launched by Schroeder even more forcefully. The outgoing chancellor lacked support for his painful agenda in his own Social Democratic Party; now it is the task of the new grand coalition to pick up the pieces and continue Agenda 2010, albeit with some changes. THE NEXT chancellor, Angela Merkel of the Christian Democratic Union, may not be able to undertake the sweeping reforms she initially desired. But simply carrying on her predecessor's plan with a comfortable majority in both houses of parliament would represent a huge step forward. Substantial change is likely, however, in the field where most Germans expect and desire continuity - foreign policy. In the 2002 general elections Schroeder latched onto widespread feelings of resentment toward America. Riding the wave of fear of and objection to the Iraq war, Schroeder wandered down a rhetorical path that ultimately led one of his key ministers to equate the Bush administration with the Nazi regime. True, the minister was dismissed. But the anti-America utterances continued, nonetheless. What some believed was merely a campaign gimmick grew to the level of a strategic plan to rally Europe around a new Paris-Berlin alliance. Schroeder spoke of Germany as a Friedensmacht, or Peace Power, and devoted much of his time to mobilizing support for a permanent seat at the UN Security Council. France and Germany were to become the center of a United Europe which would project influence worldwide, thereby challenging America's role as a Super Power. But developments on the ground derailed the ambitious effort. Most European countries refused to go along with Paris and Berlin. Then the new European constitution - intended to promote a coherent, united foreign policy and create the office of a single foreign minister for the whole union - was voted down and subsequently shelved. The United States was reportedly unenthusiastic about Germany's bid for a Security Council membership. But so were China, and even France, in spite of its new close alliance with Berlin. When it came to Israel, the outgoing German government gave the authors of the Geneva Initiative the red carpet treatment and convinced the Bundestag to endorse the document - the sole parliament in the world to do so. True, Joschka Fischer demonstrated empathy and captured the imagination of many Israelis. But the enthusiasm for him diminished as it became clear that Germany under Schroeder was unnecessarily putting itself on a collision course with America. Schroeder, by the way, visited the Middle East several times while Sharon was in office. But never during Sharon's tenure did he find the time to stop by in Israel and thus demonstrate support for the prime minister's bold disengagement initiatives. The Middle East was the region in which French and German ambitions were most pronounced. And it was there that changes on the ground most dramatically refuted their designs. The stiff rejection of American policy was simply rendered irrelevant by the disappearance from the scene of both Saddam Hussein and Yasser Arafat. As a result, in the past few months both Paris and Berlin have been seeking face-saving ways to abandon their joint posture. At present they are carefully trying to secure for themselves a role compatible with realities emerging in Iraq as well as in regard to Syria, Lebanon and the Arab-Israeli conflict. The nominated foreign minister of Germany, Frank-Walter Steinmeier, a Social Democrat, has spent years working loyally for Gerhard Schroeder. Yet he also will recognize the need to introduce major corrections to the policies of Berlin. The first would be an effort to regain the trust of America. Meanwhile, expect Angela Merkel to establish herself in a strong position and to mediate between conflicting interests and personalities in the coalition government. In the process, rather than indulge in advancing futile, unrealistic ideas and initiatives she will certainly strive to revive close ties with the US and be more supportive of practical steps in handling the complicated Middle East situation. The writer is the Berlin correspondent of the Israel Broadcasting Authority. He also comments regularly for major German media outlets.