February’s sharp rises in the surveys of euro-zone business sentiment are an encouraging sign that the region’s fiscal squeeze is not yet having a severe impact on business confidence. This, coupled with growing evidence that the external sector recovery might finally be spreading to the household sector, suggests that GDP growth picked up at the start of 2011.Nonetheless, the ongoing problems in the peripheral economies, the strength of the euro and the growing threat of tighter monetary policy continue to cast doubt on the sustainability of the recovery.
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