French president Emmanuel Macron and German chancellor Angela Merkel
Experts said the chancellor’s weakened authority, combined with the expected entry of the free market supporting Free Democratic Party (FDP) into the Berlin administration, meant the plans are in severe peril.
And there were warnings today that a failure to complete the economic integration of the single currency area, which many commentators say is built on quicksand, could even lead to a fresh eurozone “crisis“.
Just two weeks ago Mr Juncker unveiled a bold vision for a more integrated Europe in his annual State of the Union address, unveiling a series of policy proposals to deepen cooperation between EU states.
His speech had clearly been strongly influenced by the election victory of Mr Macron, who campaigned on an openly pro-EU platform and has called for significant eurozone reform to shore up the single currency in the longer term.
In the weeks prior to yesterday’s contest Mrs Merkel had appeared to be warming towards some of his ideas and had indicated Berlin could be prepared to accept a eurozone finance minister under certain conditions.
But after a lacklustre campaign and disappointing election performance the once all-powerful chancellor now finds herself having to build a coalition that will almost certainly include the FDP.
The liberals, whilst not eurosceptic in a British sense, oppose almost all of Mr Macron’s integrationist economic agenda and also want to see a mechanism introduced by which countries can be booted out of the eurozone.
They have repeatedly called for Greece to drop the single currency and revert back to the Drachma and are calling for the European Stability Mechanism (ESM), which used to bailout bankrupt EU members, to be scrapped.
Thomas Kleine-Brockhoff, who runs the Berlin office of the German Marshall Fund, said reform of the eurozone is “the single most important foreign policy issue that the new government has in front of it”.
But he said the formation of an expected Jamaica Coalition – named after the green, yellow and red colours of its party members – is likely to put such plans on hold due to intense opposition from the FDP.
Those are not ideal conditions for a Franco-German grand bargain
Referring to Mr Macron’s pledge to revive the ‘Franco-German engine’ at the heart of Europe, he said: “It would be the party of no, the party of yes and an incrementalist chancellor. Those are not ideal conditions for a Franco-German grand bargain.”
Meanwhile Green MP Franziska Brantner warned that the FDP’s stance on the eurozone, which she compared to that of the far-right Alternative for Germany, could plunge the continent back into a financial crisis.
She said: “On Europe, the FDP is not so far from the AfD on some issues. If all of their ideas were implemented we would be plunged back into a euro zone crisis.”
Meanwhile Professor Thorsten Polleit, a leading German economist, expressed doubt Mrs Merkel will be able to form a coalition with the liberal party given its intense opposition to eurozone integration.
And he said the uncertain political situation could only serve to heighten the “risk” faced by the eurozone by bringing into question the continent’s biggest economy’s unwavering commitment to underwrite its debt.
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He said: “From the point of view of the financial markets, the changed political situation in Germany is likely to have increased the ‘risk’ for the euro area. The likelihood that the support of commercial banks and national budgets can continue as silently as before has diminished.
“It is now politically more difficult to maintain the euro by means of regulative and institutional measures, such as the banking union, according to the motto ‘no matter what it costs’.”
The EU Commission’s chief spokesman Margaritis Schinas confirmed that Mr Juncker had both called Mrs Merkel and sent her a letter to congratulate her on her historic fourth term as chancellor.
He said: “President Juncker reiterates his belief that in the light of the important global challenges, Europe needs a strong German government now more than ever.
“One able to actively shape the future of our continent and in his letter President Juncker expresses his belief that the negotiations on the coalition Government will contribute to that effect.”
Mr Macron also called the chancellor, and subsequently tweeted: “I called Angela Merkel to congratulate her. We continue with determination our vital cooperation for Europe and for our countries.”