The tears shed for Chancellor Helmut Kohl following Sunday's landslide defeat dried quickly yesterday as attention turned to the shape of Gerhard Schroder's new government. By early yesterday it was clear that the end of the Kohl era would mean more than a change of faces at the top in Germany: it would usher in a new kind of politics shaped by a new generation.

Dr Kohl's defeat represents the departure of Europe's last Cold Warrior and the end of Germany's post-war political era. The politicians who are now about to govern Germany were shaped by the student revolts of 1968 rather than by the memory of the second World War.

It is a generation that already dominates the media, the law, the public service and the arts in Germany, and governs most of the 16 federal states. But the scale of Sunday's political shift suggests that Mr Schroder's election is accompanied by enormous popular expectations.

Among those who shed no tears for Dr Kohl were Germany's four million unemployed and seven million foreign residents. The outgoing chancellor may not be solely to blame for the fact that more than 10 per cent of the workforce is out of work. But his government's failure to push through reforms of the system of tax and benefits undoubtedly made the problem worse.

Dr Kohl has been justly praised for his daring in pursuing European political and economic integration and in leading Germany into Economic and Monetary Union, despite the project's unpopularity among voters. But he has shown neither courage nor generosity in his approach to foreigners living in Germany and pandered to his more xenophobic supporters with rabblerousing speeches during the recent election campaign.

Mr Schroder has already pledged to set up "an alliance for jobs and training" composed of representatives from business, the unions and the government. And his most frequently repeated declaration to voters during the campaign was that, if his government does not substantially reduce unemployment during the next four years, it does not deserve to be re-elected.

Experience in a number of the federal states has shown that an alliance between the Social Democrats (SPD) and Greens is likely to be anything other than a love match. But the Greens have come a long way since their foundation in 1983, and most of the party's leading figures now have ministerial experience at state level.

Coalition negotiations are likely to be lengthy and painstaking, with every foreseeable eventuality being agreed in advance. This is partly because the Greens' decentralised structure makes their leadership vulnerable to grassroots revolts.

There should be little difficulty in agreeing on a change in Germany's citizenship laws which will allow foreigners' children born in Germany to become citizens automatically. The new government will also abandon the official fiction cherished by Dr Kohl and his colleagues that there is no immigration to Germany.

Mr Schroder and his interior minister may seek to negotiate a Europewide regulation of immigration and asylum which could result in lightening Germany's burden of refugees.

A red-green government would enjoy a comfortable majority in both houses of parliament, making it easier for Mr Schroder to keep his promise of dissolving Germany's "reform logjam". The tax system will be simplified to make it easier and less expensive to take on new workers, and environmentally responsible firms will be rewarded.

Perhaps the biggest challenge facing Mr Schroder is that of completing the process of national unification Dr Kohl began almost a decade ago. The collapse of the Christian Democratic vote in the east and the success of the ex-communist Party of Democratic Socialism (PDS) on Sunday highlighted the lingering sense of alienation that easterners feel.

Unemployment is twice as high in the east as in the west, and 80 per cent of easterners say they feel like second-class citizens within the new Germany. Mr Schroder knows that he owes much of his landslide victory to eastern votes and that, unlike their western counterparts, eastern voters change sides with ease.

It is thus likely that his government, which will move eastwards to Berlin next year, will include a generous number of eastern ministers and will concentrate energy and resources on bringing prosperity to the east.

Mr Schroder was at pains yesterday to reassure Germany's allies abroad that the change of government would make no difference to foreign policy, even if the Green leader, Joschka Fischer, becomes foreign minister. Germany's place within NATO is undoubtedly safe, and there are few surprises in store at a European level either.

Germany's six-month presidency of the European Union in the first half of next year will offer the incoming chancellor an opportunity to prove his European credentials and put his good relations with Paris and London to some use.

But the most dramatic change that a new government brings is likely to be one of mood, making Germany a more generous, open and liberal society. The values of the 1968 generation may make themselves felt in the private sphere, so that Germany could join the Scandinavian countries in taking energetic steps to give women an equal chance in society and ending discrimination against same-sex couples.

If Germany's current economic boom continues and unemployment falls, the end of the Kohl era could herald the birth of a prosperous, socially just republic that will form the liberal heart of Europe in the 21st century.