Over the years, euro zone economic growth has been a bit like the Sirens in Homer’s Odyssey: singing a song of promise, only to end up pulling you onto the rocks. Will it be different this time?
The strong growth registered in numerous data releases and surveys at the beginning of this year has surprised many. One eye-opening example was the release of flash purchasing managers indices for France, Germany and the euro zone on Feb 21. Of nine indexes, eight registered growth and six did so at a higher level than any economist polled by Reuters had imagined. Not surprisingly, economists and policy-makers are now looking for firm proof that the euro zone’s apparent rebound this year is sustainable, as well as noting a variety of potentially destructive economic and political hazards ahead. There has not been, they say, a specific inflexion point at which it can be said that the euro zone has recovered and is off on a growth tear. Rather it has been a slow simmer. “The euro zone has been recovering steadily for three years now, helped by monetary policy stimulus, an end to fiscal austerity and a healthier financial sector,” said James McCann, OECD economist at Standard Life Investments.
“(It’s) a steady recovery which has been trundling on.” The numbers confirm this. The European Commission notes that real GDP in the euro zone has grown for 15 consecutive quarters – a sign of steady improvement.—Reuters