Fiscal worries cloud the outlook (Q1 2010)

Europe’s economies have continued to benefit from the improvement in the global environment, but there are still major uncertainties over the likely strength and sustainability of the upturn in the region. Domestic economic conditions have generally remained weak and, in the euro-zone, the strength of the single currency could yet snuff out the export recovery. Meanwhile, those euro-zone economies with a combination of fiscal strains and competitiveness problems face a painful period of adjustment which could keep them in recession for some time yet. All told, the European recovery will be of the steady, rather than spectacular, variety.