Angela Merkel was on Wednesday forced to postpone German ratification of the eurozone's "fiskalpakt" until after an Irish referendum on May 31 by a gathering domestic and European backlash against austerity.
German Chancellor Angela Merkel watches as she attends an election campaign rally together with Norbert Roettgen, top candidate of the Christian Democratic Union party CDU for the North-Rhine Westphalian federal state elections in Gelsenkirchen, Germany, Wednesday, May 9, 2012.
The weekend election of a Socialist French president on a platform of renegotiating the fiscal pact, German Social Democrats have refused to support parliamentary passage unless it includes growth as well as austerity measures.
The German chancellor had hoped to ratify the fiscal pact, including an EU treaty creating a eurozone bailout fund, on 25 May in Germany's parliament, six days before Ireland holds a popular vote and ahead of French legislative elections in mid-June.
She had intended the ratification, to be choreographed with a symbolic, simultaneous vote in the Italian parliament, to put pressure on the Irish to vote Yes and as signal to François Hollande that the fiscal pact, once ratified by Germany and Italy, could not be tampered with.
Otto Fricke, budget spokesman for Chancellor Merkel's liberal coalition partners, the FDP, admitted that she was struggling to "persuade the opposition to step up to its responsibilities", denying her a Bundestag majority.
"It may take to late June before we have a necessary majority for the legislation," he said.
The Social Democrats have stepped up opposition to the German leader's emphasis on "fiscal consolidation", or austerity, after French and Greek elections on Sunday.
Sigmar Gabriel, the chairman of the Social Democrats, blamed the rise of far-Right and Left parties in Greece on her "unreflective diktat" on austerity, to be enshrined in treaty law via the fiscal pact signed by 25 EU leaders last March.
"We're seeing the results of this policy in Greece: the right-wing radicals and the enemies of Europe have gained seats in parliament," he told Focus magazine.
In another serious setback for Ms Merkel, Mario Monti, the technocrat appointed as Italian Prime Minister in November 2011, yesterday appeared to switch his allegiance to the new French President with a call for a European "coalition of the willing" on growth.
"The greater warmth, the greater insistence that Hollande puts on the issue of growth are welcomed by Italy," he said.
Italy's reverse has sunk the Chancellor's plan for a joint Italian-German ratification "with Monti and Merkel gathered for the event, framed by a solemn declaration on common European destiny," according to document leaked to La Repubblica.
The ratification delay for the fiscal pact - which has only been ratified in Greece, Slovenia and Portugal so far - raises serious questions over its future and has rallied anti-austerity campaigner for a No vote in an Irish referendum on 31 May.
"It is clear that the austerity treaty is in real trouble," said Paul Murphy, an Irish Socialist Party MEP. "The Irish people should take the opportunity to strike it another decisive blow."
According to a senior source in the French treasury, Mr Hollande will keep up his calls for the fiscal pact to be renegotiated until after he secures his parliamentary elections on June 10 and 17. He will then do a deal with a weakened Mrs Merkel.
"Hollande will likely bluster before the legislative elections," the official told Le Canard Enchainé weekly.
"Merkel, who is already weakened, cannot afford a clash with Hollande 18 months before German elections and Hollande cannot afford to re-ignite debt war in Europe."
Bosses working for state-owned companies in France will be banned from earning more than 20 times their lowest-paid workers under one of the first laws to be passed by the country's new president-elect, François Hollande.
The law, due to be passed by decree this month, is among a raft of campaign promises to "moralise" remuneration by France's first Socialist leader in almost two decades.