The crisis in Germany sent shockwaves around Europe yesterday and the EU powerhouse looks set to face another election, which would likely reduce Mrs Merkel’s share of the domestic vote even further and offer the far-right AfD party another chance to boost its standing in Berlin.
Meanwhile, in France, President Emmanuel Macron’s plans to overhaul the eurozone and the EU as a whole have been put on ice given the crisis faced by his key ally.
Since taking office, the 39-year-old leader has urged his European counterparts to get behind a raft of major EU reforms but without the Merkel’s backing, his plans to transform the bloc could suffer.
But optimistic French diplomats have said the situation strengthens the president’s hand and are already touting Mr Macron as the new figurehead of Europe.
One told POLITICO: “There’s a vacuum. He should embark on a few trips abroad and show that he’s still determined. Basic idea: There’s a new European leader in town.
“Give a big speech to the European Parliament, make trips to Spain and Italy to show at last that he knows those two countries do count in Europe.”
Mrs Merkel is running out of allies both at home and abroad after her potential coalition partners pulled out of talks, with reports suggesting the parties were unwilling to compromise on migration and tax policy.
Now a former German ambassador to Britain has come forward and said it could be “bad news” for Brexit talks ahead of next month’s landmark summit.
Thomas Matussek said Germany was “looking inward and is self-absorbed” with Berlin’s focus away from crunch Brexit talks.
He said: “I think the German instability is bad news for Britain, it’s bad news for Europe but, most of all it is bad news for the Germans.”
The EU’s future remains increasingly uncertain and Mrs Merkel’s failure to negotiate a coalition means the bloc may have to rebalance to get away from its reliance on Germany.
Andreas Kluth, the editor of leading German business magazine Handelsblatt Global, said while Mr Macron’s election victory was seen as a positive result in Germany, Mrs Merkel’s domestic woes could allow the French president to unseat her as the kingpin of Europe just months after Mr Macron moved into the Elysée Palace.
He says the original plan had been for Germany and France to “fix the eurozone” before maintaining their strong bilateral ties to “stave off a meddling Vladimir Putin to the east, contain an impulsive Donald Trump in the west, and manage a Machiavellian Xi Jinping to the Far East”.
“Instead, the situation is the reverse. If Europe has a leader at all, it is Mr Macron.
“It is now his turn to worry about Germany being too weak to assist in the triumphs he needs to reform France and Europe.”
Despite Mr Macron’s potential bid to snatch EU power from Germany, a French government spokesman expressed concern about the political situation in Germany.
Speaking after Germany’s political parties missed their self-imposed deadline to form a government, a spokesman for Mr Macron said it was in France’s interest that there is a “stable and strong” political force in their neighbouring country.
He said: “This merely reinforces the need for France to make proposals, to take the initiative, to work on an ambitious European project that we will implement with our German partner.”