A slow but steady recovery (Q4 2009)

Europe appears to have turned a corner, with the German and French economies already expanding in Q2 and most others set to follow suit in the third quarter. But the recovery is unlikely to be very rapid. A modest improvement in global demand will mean that export growth does not reach prerecession highs for quite some time, particularly as euro-zone economies suffer from the strength of the single currency. And on the whole, fiscal and monetary policy has been less supportive in Europe than in the US. However, with notable exceptions like the UK, household and government finances are in a relatively healthy state, implying less need for a painful period of deleveraging. So while the recovery is unlikely to be as sharp as that in the US, it might be longer-lived.