The European economic recovery has remained very much of the two-speed variety as the eurozone’s core economies and some countries outside the single currency area have grown robustly, while the fiscal crisis in the euro-zone’s periphery has continued to deepen. These divergences are likely to remain in place over the coming quarters, but growth even in the core economies looks set to slow somewhat as fiscal consolidation spreads and a hawkish ECB continues to apply the brakes. This will put a dent in hopes that strong growth in the core will help to pull the peripheral economies out of their crises. That, in turn, will maintain concerns that some of those countries will in time be forced to restructure their debts, with potentially damaging effects on the currency union.
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