After Sunday's regional polls in Saarland and Brandenburg, the government's influence in parliament's second chamber, the Bundesrat, has shrunk further. Saarland was captured by the Christian Democrats, while in Brandenburg the Social Democrats lost their absolute majority and must now seek coalition partners.
Mr Schroder's government is now assured of only 26 of the 69 votes in the Bundesrat, the chamber that must approve all important pieces of legislation. The first test of the new arithmetic will be the government's crucial austerity budget, which seeks cuts of DM30bn (pounds 10.1bn) next year and offers a better deal to business.
"This tough programme to clean up public finances was a cause of our losses, but we will stick with it," Mr Schroder declared. The fate of the austerity package, derided by left-wing Social Democrats and trade unions, now rests with the opposition Christian Democrats. Mr Schroder will be forced into horse-trading, and some parts of the programme are likely to be weakened.
Germany is entering a period of unconventional politics, governed at one level by Social Democrats and Greens, and in the Bundesrat by an unstated "grand coalition" of Social Democrats and Christian Democrats. There is no guarantee, however, that such an arrangement will work.
Wolfgang Schauble, the leader of the Christian Democrats, made encouraging noises yesterday, promising not to block government legislation solely for party political reasons. But the Christian Democrats are also a divided party, and Mr Schauble does not have absolute control over his regional grandees in the Bundesrat. Peter Muller, the victorious Christian Democrat leader in Saarland, has already declared that his Land will not back the government.
But first, Mr Schroder must get the Bill through the lower house, the Bundestag. After Sunday's fiasco, the left feels more convinced that the Chancellor's "Third Way" policies pose a mortal threat to the party's future. "If the Chancellor does not listen to the party leftists, then it might be useful to look more closely at the election results," said Andrea Nahles, a leading leftist MP. But Mr Schroder is in no position to listen to the left, because the changes the traditionalists demand would certainly be vetoed by the Christian Democrats, who now hold the upper hand.
For this reason alone, Mr Schroder is condemned to seek his majority on the right, and to increase his struggle against the left. At the same time, the Chancellor is braced for further election defeats, hoping that the expected economic upturn will stop the rot before it is too late.