Recent weeks have brought signs that the recovery in the euro-zone might have ground to a halt. Q4’s GDP release confirmed that the region expanded by just 0.1% on the quarter. (See Chart.) And recent business surveys, together with the bad weather, suggest that we should not hope for much better in the first quarter. All of this, coupled with the crisis in Greece, has prompted the euro to depreciate further, which might help exports in the months ahead. But with the need for fiscal tightening becoming more urgent, there is little hope of a marked domestic recovery.
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