Emmanuel Macron’s lightning conquest of France has put Germany in an awkward spot.

Berlin may have to start fleshing out its European rhetoric and contemplate a Franco-German grand bargain on the future of the EU, or risk serious consequences down the road. Excuses are running thin.

French voters have picked an apostle of Europe and an arch-defender of the Franco-German axis. While this is welcomed with jubilation by some in Berlin, it raises thorny questions that others would prefer left unanswered.

Charles Grant from the Centre for European Reform says Mr Macron’s strategic gamble is to restore French credibility, and then to lever this to extract a “new concordat on the euro” from Germany.

He plans Nordic labour reforms, easier collective bargaining rules, and the sort of tax shake-up that German leaders have long demanded. It is the French riposte to the Hartz IV reforms that - supposedly - lifted Germany from its sickbed a decade ago.  

The quid pro quo is that Berlin must agree to eurozone fiscal union, and cut its corrosive current account surplus - now 8.6pc of GDP and in breach of EU rules.

“If France is not reformed, we will not be able to regain the confidence of the Germans,”  Mr Macron told Ouest-France.  “After that Germany must ask whether its own situation is tenable. It is accumulating surpluses which are neither good for its own economy nor for the eurozone.”

He wants a eurozone finance minister and budget, with joint debt, and a banking union with shared deposit insurance, all legitimized by a new parliament for the currency bloc. It implies a unitary eurozone superstate.

This calls Berlin’s bluff. The German elites often argue that they cannot accept such radical proposals as long as other eurozone states scoff at budget rules and fail to put their house in order. Whether Germany’s real motive is to protect its mercantilist interests as a creditor power and run monetary union to suit itself is conveniently never put to the test.

As French economy minister, Mr Macron was an acerbic critic of the austerity regime imposed on the eurozone by Germany. He decried the current half-way house of an orphan currency with no EMU government to back it up, and argued that was is folly to try to close the North-South gap in competitiveness by imposing all the burden of adjustment on the weakest high-debt states. Such a policy misdiagnoses the cause of the EMU crisis -  capital flows, rather than fiscal or moral failure - and leads to a deflationary vortex for the whole system.

David Fuller's view

Emmanuel Macron is the most interesting new arrival in European politics for a long time and he is challenging conventional views in the dysfunctional EU.

Basically, if they want to make it work, bring in fiscal union, as anyone with a modicum of financial savvy and historic awareness knows.  However, the idea of fiscal union - effectively creating a United States of Europe - was never popular with the European electorate.  Moreover, it was even less popular with many European governments.  That is why it was gradually being ushered in via the back door by EU bureaucrats. 

Today’s question: is the EU now too dysfunctional and too populist to openly discuss fiscal union? I would have thought so but along comes fresh-faced, intelligent Emmanuel Macron, apparently challenging Germany on this subject. I can sense the alarm in Europe’s largest economy.

It makes no difference for the UK.  We will shortly resume our historic role as a sovereign nation.

Here is a PDF of AEP's column.