The euro-zone economy: Losing the plot

AS IN a complex film script, at least two storylines have been in play for the euro zone this year. One is brightly lit, featuring the revival of both consumer and business confidence, the return of investors to the troubled economies in peripheral Europe and the continuing recovery from the double-dip recession. The other is sombre, focusing on the weakness of that upturn, the onset of disturbingly low inflation and the continuing fragility of over-indebted economies and their banks. The past few days have brought a reminder that this second story is not yet fully told.A crisis at Banco Espírito Santo (BES), one of Portugal’s biggest banks, prompted a plunge in Portugal’s stockmarket and lesser tumbles elsewhere. Angela Merkel, Germany’s chancellor, said that the episode illustrated how swiftly market nerves could return and how fragile the construction of the euro remained.Renewed worries about banks have coincided with some gloomy economic numbers. Industrial production fell by 1.1% in May compared with April, leaving it up only 0.5% over the past year (see chart). The decline may have been exaggerated by temporary factors, such as workers taking additional…

Link to article: www.economist.com/news/finance-and-economics/21607822-weak-growth-and-nasty-surprises-are-still-hallmarks-single-currency?fsrc=rss|fec

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