Europe rebounds but Greece may drag down growth

Greek flagEurope has proved to be a growth surprise for some, it has been the best performing major equity region so far this year, outpacing the US by a wide margin.

A report by global asset manager Pinebridge Investments entitled Investment Outlook 2015 Mid-Year Update finds that the global economy remains on a gradually accelerating recovery trend, providing the best environment for financial markets as central banks should not need to intervene to achieve gradual inflation.

As a result of this broadening growth trend, the firm has raised its growth forecast for the Eurozone to 1.4%, from the more moderate 1.1% predicted at the beginning of 2015.

Greece is the only exception. The current standoff has damaged its relationships with the very institutions it relies on to avoid bankruptcy and has pushed the country back into recession.

Markus Schomer, chief economist at PineBridge Investments and author of the report says that the European Central Bank’s policy of quantitative easing (QE) has boosted European equities in much the same way that the US Federal Reserve’s QE programme helped US equities rally. He does however think the extraordinary monetary policy will only provide a short-term boost to overall growth and inflation.

Schomer also thinks QE should insulate the rest of the Eurozone from the possible contagion in case of Grexit.

©2015 funds europe