A weaker currency, record low interest rates and cheaper energy lifted Europe's purchasing managers' index (PMI) to a three-year high in March. But while that data, which measures confidence and future manufacturing expectations, has raised hopes of a turnaround in the eurozone's fortunes, concerns remain over the damaging impact of a potential Greek exit.
The PMI, a closely watched barometer of economic health, beat expectations by rising to 54.1 this month. According to investment bank RBC Capital Markets, that represents GDP expansion of about 0.4 per cent a quarter and is in line with their growth projections of about 1.4 per cent this year and 1.8 per cent for 2016.
Those more bullish figures largely correlate with forecasts from other analysts, who argue that factors such as cheaper energy prices and low interest rates arising from the European Central Bank's (ECB) quantitative easing programme have vastly improved sentiment. But, above all, a weak euro was cited as playing the key role by providing a welcome boost for exports.
But amid growing optimism that the ECB's bond-buying plan and low commodity prices are triggering the eurozone's long-awaited return to growth, fears linger that any progress could be undone rapidly by Greece's refusal to bow down to its main creditor's demands. Negotiations over the country's bailout programme, funding needs and reform agenda have seen tensions with Germany boil over in recent months, fuelled by reparation demands for damage suffered at the hands of the Nazis during the second world war.
These high-profile spats have been doing the rounds across various media outlets since the leftwing Syriza party came to power at the beginning of the year, although a four-month extension to Greece’s bailout programme was at least agreed in February.
What's missing now, however, is a much-needed agreement on a concrete list of reforms, something prime minister Alexis Tsipras has promised to present on Monday following a clear-the-air sit-down with German chancellor Angela Merkel this week.
Whether an agreement is made from that all-important list is still unclear, though, and certainly clouded by the fact that Mr Tsipras stormed to power pledging to end the same austerity policies that Greece's creditors wish to maintain. His promise to renegotiate the terms of the bailout via measures such as reinstating civil servants, raising the minimum wage and writing off a significant proportion of outstanding debt are not exactly flavour of the month with German taxpayers.
Yet in Greece these measures are seen as paramount to arresting a slumping economy. Greek GDP has fallen more than a quarter over the past few years, as a €10bn (£7.3bn) cut to government expenditure has hit wages and left 1m more people unemployed than five years ago.
As this desperate situation is not expected to change until the so-called troika eases up on its demands, the prospect of a 'Grexit' remains very real. Such talk has caused Greek bond yields to shoot up to new heights in recent weeks, leading Morgan Stanley strategist, Paolo Batori, to suggest that the likelihood of an exit is becoming increasingly credible.
Mr Batori warns that those chances have risen at the "high end of the range" of late, from one in five to one in three. Rising speculation, meanwhile, prompted Moody's to discuss the "serious implications" of a move that could effectively bring the eurozone to its knees. Kathrin Muehlbronner, one of the rating agency's senior credit officers, recently wrote that a Grexit would inevitably raise questions about other countries following a similar route out of a union which was designed to be indivisible. Even if the immediate financial impact of a Greek exit is "limited", she says the possibility of Portugal, Spain or Italy following suit would have damaging implications for the investors who've been snapping up their bonds.
Daniel Murray, chief economist at EFG Asset Management, thinks that while the Greek government is right to negotiate a fairer deal, it should also be wary of following the treacherous path that led to Argentina defaulting in 2001. In the case of a Grexit, he predicts that the debt burden would only grow as the new currency would be speculated against. And, should the Greek government opt to default, he reckons confidence in its banking systems would deteriorate and lead to the imposition of capital controls to prevent massive outflows.
