The European economy's apparent rebounds from the Greek debt crisis and its effects should be treated cautiously, leading economists have said.
As economic sentiment for the 16-nation euro currency area hit a 28-month high of 101.3 in July – up from an upwardly revised 99 in June – observers said that much of the good will was coming from core countries and that peripheral European nations were still facing challenges.
Jennifer McKeown, European economist at Capital Economics in London, said most of the good news is coming from Germany, Belgium and the Netherlands, where exports are booming. Countries like Greece, Ireland and Spain are still mired in a poor economic situation, she says.
Hans Redeker, head of foreign exchange strategy at French bank BNP Paribas, warned, "Europe has recovered from the April and May crisis, but not because of domestic demand – it's all on the basis of exports.
"If we're not able to transform this success in exports to better performance on the domestic demand side, this is going to turn out to be a very short-lived boom."
The warning came as the euro hit 1.309 to the U.S. dollar, its highest point since 10 May. It followed the implementation of a two-year austerity plan by Italy's lower house of parliament.
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