Contrary to the pessimists' view, Europe will show economic recovery this year and next. And that will ensure monetary union stays on track for 1999. In core Europe, super-cheap money has been complemented by weak exchange rates. And those easy monetary conditions are likely to win out over Europe's Maastricht fiscal masochism to produce economic recovery.
Final sales (domestic demand less inventory build-up) are already rising in Germany and France. Export orders are recovering everywhere too. Capacity utilization is rising and capital expenditure is on the mend. All that is needed is for household consumption to take off.
Europe is an economic soufflé with a collapsed core. The periphery (except for Italy) is growing fine. Once Germany and France start growing by 3% (my forecast for next year), the growth pop-up in the middle will change perceptions of Europe, Emu and interest rates, radically.
The recovery is driven from...
