With the conservative Angela Merkel set to become Germany's chancellor, some analysts believe the pragmatic politician will restore relations with the European Commission.
Under the out-going Social Democrat Gerhard Schroder, dealings between Brussels and Berlin reached a low when he came to power in 1998, reversing previous policy and starting to openly fight for Germany's interests within the EU.
This led to very public clashes with the previous Prodi commission and an erosion of Germany's traditional balancing role in the EU.
But under Mrs Merkel, this is set to change. According to Marco Incerti from the Centre for European Policy Studies, Mrs Merkel is "likely to interact well with this commission".
He adds that she is likely to have much in common with the industry commissioner, the German Gunter Verheugen, who is on a big de-regulation drive to cut unnecessary EU laws.
Katinka Barysch, from the Centre for European Reform, says that while Mrs Merkel does not give the impression of being an "ardent pro-European" and will continue to protect German interests, she is likely to have a natural sympathy with the current commission.
The change in the relationship with the commission will come about mainly because of an expected change in the Franco-German relationship, according to Ms Barysch.
She points out that Mr Schroder has stood by French president Jacques Chirac, who has been publicly bashing the commission for being too neo-liberal, but adds that if Mrs Merkel "makes up her own mind ...she will probably have better relations with the commission".
Slowing down economic reforms
The other area where the future German government will be watched keenly is economic reform.
Long been termed as the sick man of Europe, there is a feeling that a coalition between the Christian Democrats (CDU) and the Social Democrats (SPD) will mean a reform slow-down in the EU's biggest economy, despite Mrs Merkel's assurance on Monday (10 October) that the parties have agreed "there is no alternative to a reform course".
"Of course it will be slower than if the CDU alone was in power", says Mr Incerti.
The result could be a watering down on the economic programme that Mrs Merkel pushed during her election campaign, which included easing hire and fire rules and changing the way labour agreements are negotiated.
In February, German unemployment reached a post-war high of around 5.2 million people while GDP is expected to grow just one percent this year.
EU policies
Having a grand coalition may also affect Germany's position on key EU legislation.
Mr Incerti points out the extreme wings of both parties may find it hard to agree on the EU's plans to open up the market in services - meaning it will take longer to establish a common German position.
It is also unclear what Germany's new government will mean for pressing EU issues such as agreeing the next budget for 2007-2013.
Britain, which currently has the EU presidency, has reportedly been waiting for Mrs Merkel to get into power so it could get some support for its proposed reform of the EU budget - in favour of more research and development and away from subsidising farmers.
However, Ms Barysch adds a note of caution to this scenario. She points out that Edmund Stoiber, tipped to become the country's economics minister, may be given more European powers.
This will have a "negative effect" if it means more power over the EU budget. Coming from staunchly conservative Bavaria with its large farming lobby, he is set to oppose all changes to the Common Agricultural Policy.
"It's important to realise that it's not the Mrs Merkel that London had expected before the elections", said one EU official pointing out that all political calculations will have to be re-done in light of the fact that Mrs Merkel is a weakened head of a grand coalition.
Outsiders are likely to have a chance to assess the final coalition structure by 18 October, when both sides are aiming to have reached agreement. This is the day the new parliament holds its first session.
By: N. Peter Kramer
