An interest rate rise from the ECB or even the tapering of the Federal Reserve's quantitative easing programme could stir up a renewed crisis
Olli Rehn, Brussels's economy commissioner, turned to English mountaineer Edward Whymper – the first man to climb the Matterhorn – for an adage to sum up the challenge still facing the eurozone: "Do nothing in haste; look well to each step, and from the beginning think what may be the end."
It hardly augurs well, then, that on the 1865 expedition Whymper was describing, one of his companions fell to his death on the descent from the Matterhorn's summit, dragging three others down with him. Whymper himself only survived because the rope broke.
While the eurozone has finally clambered out of its 18-month recession, led by a stronger-than-expected performance from the German and French economies, the danger for the 17-member bloc is far from over.
Few details are available about the breakdown of growth in these early estimates; but the German statistics office said domestic demand – and particularly investment – was largely responsible for the country's healthy-looking 0.7% growth in the second quarter. Unemployment in Europe's largest economy is close to a 20-year low.
That will have come as a welcome boost to Angela Merkel, who faces a tough re-election battle in September. But since the eurozone's leading economy is a major market for many of its crisis-hit southern neighbours, it should be good news for everyone else, too.
Portugal, where there have been protests over the latest round of austerity measures in recent weeks, also appears to have staged an impressive recovery, with GDP jumping by 1.1% in the second quarter of the year – though analysts were sceptical about whether that can represent the true strength of the embattled economy, where unemployment is running at more than 16%. Economists at Barclays predicted on Wednesday that Portugal will need fresh debt restructuring before it can emerge from its long-running crisis.
Wednesday's data showed that bailed-out Greece, Cyprus and Ireland are still in recession, as are Spain and Italy, the two countries deemed most at risk of needing future assistance from their fellow member-states.
The question now will be whether these data mark the start of a sustained, consumption-led recovery in Germany and France, which will ripple out to their eurozone neighbours; or a return to business as usual, with the strongest countries growing at a healthy clip, and the eurozone's embattled "peripheral" members trapped in a downturn.
While Germany's prospects look strong, it can't kickstart a recovery across 17 countries all on its own. France is battling high unemployment, and rock bottom corporate profitability means firms are unlikely to go on a hiring spree any time soon – which in turn makes a consumer-led recovery look highly unlikely. Italy is unlikely to achieve much better than 1% annual growth, which is hardly likely to suck in a flood of imports from Ireland or Greece.
As Dario Perkins, of consultancy Lombard Street Research, puts it: "Without France rediscovering its 'va-va-voom' and with the rest of the Mediterranean countries struggling with too much debt, Germany is still the euro area's only bright spot."
Even if the recovery did start to gather pace beyond the industrial heartlands of Germany, financial markets would rapidly start speculating about when the hawks at the European Central Bank would agitate for a rate rise. This would be potentially devastating for the weaker countries in the pack.
Meanwhile, though financial markets have been relatively calm of late, it wouldn't take much to stir up a renewed crisis – and the trigger could even come from the other side of the Atlantic. The International Monetary Fund warned recently that the planned "tapering" of the US Federal Reserve's massive quantitative easing programme could present a serious threat to the eurozone, if it drives up bond yields worldwide, making it more costly for governments in debt-burdened Europe to borrow.
As growth returns, at least to some, perhaps this summer will mark the beginning of the end for the eurozone crisis, but a sustainable economic model for the 17-member club remains a distant prospect. Rehn may yet prove to have been right to summon up the image of a team of doughty mountaineers, roped together, picking their way along the perilous path back to safer ground.
