Angela Merkel has scored a remarkable victory.

In Sunday’s federal election she won a third term as German chancellor, and her conservative bloc achieved its best result for over two decades, winning over 41 percent of the vote. It did so well that it narrowly missed clinching an absolute majority in the Bundestag.

Merkel will be forced to form a coalition. Her expected partner is the Social Democratic Party, which polled 26 percent. But unlike the last time she had to share power with this party (2005–2009), Merkel is now in a far stronger position to call the shots. And she is in a very strong position to shape policy for Europe. The long interregnum that preceded this German election is over.

Merkel will come under pressure from Southern European eurozone countries to ease up on the austerity measures she insisted upon in return for substantial loan guarantees. Greece may soon request a third loan, raising questions about the merits of continuing to bail out the country.

If Europe’s Southern periphery is hoping for any relief from the Social Democrats sharing power with Merkel, they could be mistaken. Throughout the euro crisis, the Social Democrats have supported Merkel’s position. With an electorate that has clearly endorsed Merkel’s handling of the crisis, the Social Democrats do not have much room for maneuver on this issue.

François Hollande, France’s Socialist president, had been hoping for a Social Democratic victory. But with Merkel now firmly in the saddle, she and Hollande have little choice but to begin working closely together on European policy.

For France, this means, first of all, introducing long-overdue reforms. With Merkel’s support, the EU had allowed Hollande some breathing space over reducing the French budget deficit. But he did not make much use of that time. Now, Merkel is worried not just about the effect of France’s weakness on the German economy but on the credibility of the eurozone as a whole. She is sure to make that clear to Hollande in the coming weeks.

Furthermore, because France is so crucial to the eurozone and to the EU, Merkel and Hollande need to overcome their personal animosities and revive the Franco-German engine. Ever since Hollande took office two years ago, the relationship has been bad. The two leaders did not even bother to hold the bilateral meetings that have traditionally preceded EU summits. Continuing this neglect would be dangerous for Europe’s future.

In London, David Cameron, the British prime minister, must be cock-a-hoop about Merkel’s victory. He believes that Merkel is amenable to his wish list on EU treaty reform, which includes repatriating powers from the European Commission in Brussels back to the member states. Were that to happen, he might be able to win the UK referendum on EU membership planned for 2017.

Merkel is desperate for Britain to remain in the EU. But is she desperate enough to give up on parts of European integration, particularly the political and social dimensions?

In this regard, Germany’s Social Democrats could play an important role in setting Berlin’s agenda for Europe. The party is more pro-European than Merkel’s conservative bloc. Indeed, had the conservatives won an absolute majority in the Bundestag, the party’s Euroskeptic wing would have had a much stronger say. The Social Democrats will now temper that.

Indeed, if this “grand coalition” does emerge in the coming weeks, it could be good news for Europe. For far too long, Euroskeptics across Europe have been able to flourish because Merkel rarely said where Germany stood on Europe.

The longer she prevaricated for fear of alienating her own Christian Democrats, the more movements hostile to EU integration could try to fill the vacuum she created. Now, Germany’s new government has to take a stand on Europe.

That will also mean understanding that Germany and the EU must act strategically. For far too long, Germany’s foreign policy has been reactive and uncritical. Merkel has never made any effort to strengthen Europe’s foreign, defense, and security policy.

Yet weakness is not something that the EU can afford. The administration of U.S. President Barack Obama is looking increasingly ineffective, while instability continues to rock Europe’s neighborhood.

Merkel now has the chance for a fresh start. Whatever coalition emerges following the election, the chancellor shouldn’t squander her victory.