FRANKFURT (MNI) – Latest hard data and projections see the euro
area’s recovery gathering pace even as concerns over the sovereign debt
crisis’ impact on the real economy continue to mount.

Eurozone industry orders rose at the fastest pace in almost three
years in March, with notable gains across the board, while four of the
previous five months were revised upward, Eurostat reported on Tuesday.
March’s 5.2% monthly increase gave a 19.8% rise on the year, the
strongest annual gain since May 2000.

The OECD on Wednesday significantly hiked its growth forecast for
the Eurozone to 1.2% in 2010 and 1.8% in 2011 from 0.9% and 1.7%,
respectively, made in November.

Competitiveness has been boosted by the depreciation of the euro
and “GDP growth is projected to strengthen over the coming quarters as
exports benefit from the rebound in world trade,” the OECD said.

The Bundesbank issued a similarly positive outlook for the
Eurozone’s largest economy.

Germany’s economic recovery will “gain significant momentum” this
spring after negative one-off effects come to an end, the central bank
said. “The economic performance should in all likelihood expand
robustly.”

The key growth-driver should remain the export sector, since it is
likely to receive additional support from the recent drop in the euro,
the Bundesbank said.

However, the Bundesbank warned that “the risk of negative effects
on confidence as a result of the most recent, dramatically exacerbated
tensions in the Eurozone” may still hamper the economic recovery ahead.

“The critical question is whether the real economy can sustain the
renewed turbulence in the financial markets,” European Commissioner for
Economic and Monetary Affairs Olli Rehn said on Tuesday.

The recent tensions have already appear to have hit consumer
morale.

In Germany, concerns about government debt in the Eurozone and
worries about the stability of the euro left the GfK consumer sentiment
index down 0.2 point in June at 3.5, the research group said Wednesday.
France also reported a pull-back in consumer-spending in April.

Business climate indicators were mixed, with French business
climate indicator stable in May at relatively high level, in line with
continuing albeit modest recovery.

Belgian business morale, on the other hand, eroded more than
expected in May, as weaker activity and demand weighed on manufacturing
and business services, the National Bank of Belgium said Wednesday.
After the setback in February, the latest downturn in manufacturing
morale is a reminder that the industry recovery in the Eurozone remains
fragile and uneven.

The Eurozone’s debt crisis and consequent fiscal adjustments will
certainly weigh on medium-term growth prospects. Short-term implications
for the real economy remain hard to gauge.

–Frankfurt newsroom +49 69 72 01 42; e-mail: jtreeck@marketnews.com

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