There are two issues here.
Language Firstly, Brits (and Irish
AFAIK) tend not learn foreign languages. The main reason for that is that English is the international language of business and is the most widely-spoken language in the world (not the language with the most native speakers I know, but the most
widely spoken). Not as much emphasis is put on languages in school in the first place, however the main factor is the pervasiveness of English-speaking media, which means that it is much easier for Europeans to gain a high standard English than vice versa. Along with many of my fellow Brits of a similar education I can read French and some German, but due to lack of practice I can't speak either language.
It is not surprising that continental airlines require their pilots to be fluent in their own language. This stems mainly from national pride - there are few other justifications for it - many Asian airlines operate quite safely with one member of the flight crew who does not speak the local language.
Acceptance of foreigners This is the main issue here. If I went and practiced my French/German/whatever until I was fluent, would I really get a job with Air France / Lufthansa / whoever? Especially since I have EU work rights and a European JAR Licence?
As has been said, there are many European countries where this would not be the case, and they tend to be the Latin/Mediterreanean rather than the Germanic/Nordic ones. So what benefit have we really got from JAR other than cost and hassle? It's basically a one-way street for continentals to grab UK jobs, even after the language factor is ignored. I don't begrudge any individuals for taking advantage of this (who wouldn't), but it doesn't make it any less annoying.
Without being too political here on wannabes it seems like yet another part of great EU agenda - where certain countries who are enthusiatic to sign away other countries' freedoms in the interests of the grand European project, and are the first to criticise other countries for not being European enough, hypocritically do as much as possible to avoid the same Euro-policies when their own national interests are at stake
Anyway, dragging the thread back onto the subject, some countries have not yet fully implemented the JARs, and many airlines have not yet made the adjustment to using JAR terminology in their job requirements, so that could be the origin of Lufthansa's 'German ATPL' requirement.