As things stand, Merkel’s hands are tied unless and until she wins re-election in September. But even after that she is unlikely to give much ground to Macron. The thing about the German establishment, which is so easy to under-estimate, is that they really believe the guff they espouse about the need for fiscal restraint and the virtue of current account surpluses. Macron may be set for a honeymoon period over the summer. But things will not look so good come the autumn if his domestic reform agenda has hit difficulties and Merkel is refusing to make concessions.

Meanwhile, thanks to higher inflation, the European economic environment will become more testing later this year, and perhaps more so next year and beyond, if and when the current global upswing starts to stall. Plenty of observers think that the next US downturn may not be far away.

Admittedly, some European commentators think that the eurozone economy will receive a boost from Brexit as foreign investors shift money from the UK to the continent, and various businesses, including financial ones, leave London for Frankfurt or Paris. But I think this view is misguided. The exodus of businesses, people and capital from London will probably be minor.

Indeed, Brexit may pose a threat to the eurozone if and when it becomes clear that the UK has managed Brexit well and is continuing to outperform its continental neighbours. Of course, this is not an immediate prospect. First the UK has to leave and then it will be some time before it becomes clear how well the country is faring.

All along, though, I have thought that the weakest link in the euro chain was Italy, where elections are due by May next year at the latest. It is striking that all of Italy’s opposition parties are now eurosceptic. The Five Star Movement, led by Beppe Grillo, leads in the opinion polls. Grillo’s party, although quirky, is not like Marine Le Pen’s National Front. It does not have the same protectionist agenda and does not have to fend off accusations that it is tinged with racism and anti-semitism. Moreover, despite the current slight upturn in its economy, Italy remains deeply depressed. Grillo could easily deliver the shock that Marine Le Pen did not.

So do not be fooled by the appearance of calm. There is an almighty task facing the governments of Germany and France to forge the necessary institutions to make the euro system sustainable. What recent political and economic developments have done is to provide a reprieve, but no more than that. Failure by Macron to introduce radical reform, a major row with Germany over the course of its policy and reform to the eurozone, or the election of a eurosceptic government in Rome could all deal the euro a fatal blow.

One way or another, the euro does not make sense. It is only a matter of time.

David Fuller's view

I would not underestimate Macron, as I have said before, and we should not overlook Super Mario Draghi’s considerable contribution to euroland’s survival and modest recovery to date. 

Nevertheless, remember that Europe last prospered when it was a free trade region of independent nations, before the euro was introduced in 1999. Without fiscal union, which Germany and most other EU countries resist, the euro remains fatally flawed. 

Here is a PDF of Roger Bootle’s column.