July’s improvement in the euro-zone composite PMI was an encouraging sign that the economic recovery has continued and marked a stark contrast with falls in similar indicators in the US and UK. With the worst fears concerning peripheral debt easing a little, it is not surprising that the euro’s rally has continued. But further falls in consumer confidence in the periphery have highlighted the damage that fiscal austerity can do. As the fiscal squeeze spreads and tightens, sentiment in the region’s core might deteriorate too.
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