European recovery: Champagne? Not just yet

EU“Don't break out the champagne yet,” says Andrew Goldberg, global market strategist at JP Morgan Asset Management, of the European recovery.

Europe officially emerged from recession last week, posting 0.3% growth in the second quarter.

Goldberg says it is too early to tell if the European recovery is sustainable, adding that fiscal consolidation, tight credit conditions, deleveraging, political uncertainty and a slow global trade are drags on the recovery.

Unemployment, he adds, is still well above 12% in peripheral countries. “Greece in particular remains underwater and the question is whether they drown before the economy can resurface,” Goldberg says.

Robin Bew, chief economist at the Economist Intelligence Unit, shares Goldberg’s concerns over unemployment, fiscal austerity and political instability.

Slightly more upbeat is Thomas Becket, chief investment officer at UK-based Psigma Investment Management, who says there are signs that Europe, the UK and Japan are all gaining economic traction.

“There is a decent chance that the world economy can belatedly return back to trend growth after five unimpressive years,” he adds, though not without issuing a note of caution. “However, we cannot yet say that the dark days are firmly behind us and structural issues still need to be addressed.”

The eurozone was led by stronger-than-expected growth in Germany, Finland and France.

Portugal also did well, surprising with 1.1% growth, statistics from Eurostat, the European statistics agency, show. Italy and Spain, however, posted negative growth numbers and remain in recession.

Bew says “while the road ahead remains long and hard, the end of recession is a start”.

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