BRUSSELS — It’s been easy to overlook the growing signs of economic recovery in Europe. But a raft of indicators have pointed to an uptick in activity that puts the 19-country eurozone economy in a position to do better than expected this year … provided it doesn’t stumble.
Fourth-quarter figures Friday aren’t expected to show a big improvement yet, with most economists predicting mild growth of 0.2 percent for the second quarter running. But most expect growth to accelerate for a number of reasons.
The evidence
For years, the eurozone has been in intensive care, sliding into two recessions as it struggled with a debt crisis that raised questions over the survival of the euro. Since European Central Bank President Mario Draghi said in July 2012 that the bank would do “whatever it takes” to save the euro, tensions have eased. Recently, there’s been evidence of a turnaround.
• Retail sales have risen for three straight months, contributing to growth in the last quarter of 2014.
• Though high at 11.4 percent, the unemployment rate has edged down in the past year. Surveys are pointing to an uptick in hiring.
• Germany’s Ifo survey of business confidence rose to a six-month high in January.
• Financial information company Markit said its purchasing managers’ index, a gauge of business activity, hit a six-month high for the eurozone in January.
• There are signs of life in the auto market, which grew in 2014 for the first time since 2007.
The reasons
• The drop in the price of oil since summer: Weaker oil prices are like an immediate tax cut for consumers.
• The euro’s descent to near 11-year lows against the dollar in the wake of the ECB’s decision to buy government bonds: Though 60 percent of trade in the eurozone is among countries in the currency zone, the remaining 40 percent will benefit by becoming more competitive internationally.
• The ECB stimulus: The ECB is preparing a 1 trillion euro stimulus to drive up inflation starting in March. The stimulus should keep a lid on borrowing rates for businesses and households, and potentially boost the value of some financial assets, driving up consumption, too.
The risks
• The Greek crisis: Though the prevailing view is that the new Greek government will reach a compromise with its creditors, no one is sure. Greece’s exit from the eurozone remains a possibility. How that would affect the economy is unknown. All eyes are on Wednesday’s emergency meeting of the 19 euro finance ministers in Brussels.
• The conflict in Ukraine: The European Union’s 28 leaders will discuss this today, with some urging an extension of Russian sanctions. Moscow has yet to deploy its key retaliatory weapon against the West — stopping oil and gas sales — for fear of further damaging the Russian economy. If it were to limit such sales, talk of eurozone recovery would halt.
