A Positive “Muddle Through” Scenario Remains the Most Likely Outcome, but the Road to More Solid Growth in the Euro Area Will Remain Bumpy
- The Conference Board Leading Economic Index® (LEI) for the Euro Area continued to improve in February, and the country indexes have also been improving in recent months
- The European Central Bank’s long-term refinancing operations (LTROs) have led to a broad-based improvement of financial conditions
- The bailout of Greece, the fiscal compact, the European Stability Mechanism (ESM), and possible help from the IMF have bought time
- High levels of unemployment in Europe, especially those found using a broader measure that includes inactivity in the labor market, reflect structural weaknesses
- On a unit-labor-cost basis, manufacturing in Europe is less competitive than in the United States
- Reforms to create more flexible labor markets could help European economies become more competitive
