There are several big bubbles driving the global economy and its financial markets. There are the twin bubbles of US household debt and house prices, driven by easy money. And there is the Japanese government bond bubble, fed by excess savings and cheap credit. But the next great bubble in the world is continental European (principally German) labour. This euro wage bubble is sustained by sticky prices and state subsidies.
One by one, these bubbles will eventually burst. Financial asset allocation over the next year or so will depend on how they burst and when.
In Europe, consistent growth of private sector credit above European Central Bank targets tells a hidden tale of EU corporations (which stopped investing aeons ago) financing the high cost of their labour (and the cashflow deficits caused by the labour cost bubble) with bank credit. And Europe's overpriced labour markets are in some respects similar to the US service sector, which has also managed to overpay its workers and overcharge its clients for very poor productivity, simply because it has not had to compete globally.
Europe's bubble is different because it is not a balance-sheet bubble but a profit-and-loss item in the greater economic scheme of things.