Better than a kick in the face

Euro zone recovery isn't real yet

The euro zone's technical exit from recession is just the end of the beginning. A 0.3 per cent increase in GDP in the second quarter is undoubtedly a step in the right direction. But output in the single currency area is still basically stagnant: the conditions for a stronger pickup are barely satisfied.

It is tempting to feel more optimistic. The rise was 0.1 percentage point above the average forecast of 35 economists polled by Reuters.

Although this pleasant surprise could easily be revised, the GDP calculation is based on more recent data than is available to analysts.

The most likely reason they were too cautious is that the data has been strengthening in the last month or two.

Overall, the national distribution wasn't unhelpful to the cause of euro zone unity. Output in Spain and Italy is still shrinking - but by much less than in earlier quarters. Germany remains a regional motor with a 0.7 per cent gain, while France, which is in danger of turning into another crisis country, provided a respectable 0.5 per cent.

These variations may be no more than bubbles on a placid stream. Euro zone GDP remains basically stuck - 2.6 per cent below the pre-crisis high and 2.9 percent above the post-crisis low. At the second quarter's rate of increase, the previous peak will not be reached for another two years.

There is one good reason for the stream to start flowing faster: in most of the over-borrowed periphery nations, fiscal austerity has run its course and wages have fallen to sustainable levels. Stability is probable and fairly strong growth is possible. Portugal reported a 1.1 per cent quarterly GDP increase, although special factors may distort that number.

If the periphery does start to grow strongly and the core's momentum picks up, then the euro zone may finally be entering into a genuine recovery. It's a fragile hope. But the second quarter data makes that dream a little less implausible.