Latest figures show that industrial production slumped in October - by 0.7 per cent in France, 1.1 per cent in Italy and 2.6 per cent in Germany. Carsten Brzeski at ING Bank says this means a recession in Germany in the fourth quarter is now "inevitable". Dario Perkins at Lombard Street Research adds that it means that fiscal austerity is "self-defeating".
But government bond yields in southern Europe have stayed relatively low and share prices across the region have edged up despite all this grim economic news; 10-year yields in Spain and Italy are 5.6 and 4.8 per cent respectively, well below the levels they reached at the peak of the crisis. Economists think this shows that the ECB's bond-buying policy has succeeded in reducing tail risk, and the chance of a disaster.
Also, hopes are growing that the eurozone might be able to export its way out of recession. Recent figures show that retail sales and output in China exceeded analysts' expectations, and recovery there should boost exports. Mr Brzeski says: "Looking beyond the next one or two quarters, the German economy should be able to pick up speed relatively quickly." This would help raise exports from southern Europe to Germany.
Better still, the fundamental cause of the euro's crisis - big borrowing by peripheral countries - is fading. Holger Schmieding at Berenberg Bank estimates that the combined current account deficits of Portugal, Ireland, Greece and Spain have fallen from 7 per cent of GDP in 2008 to less than 2 per cent in the last 12 months. This, he says, shows that they are "rapidly" reducing their borrowing from overseas. He says: "As long as policymakers contain the tail risks, the euro crisis can fade further over the course of the next year."
But so far this adjustment has come simply by peripheral countries cutting spending rather than from any improved demand. And economists agree that this is not enough. "Euroland needs jobs, not austerity," says Randall Wray of the Levy Economics Institute in New York. The fact that the world's second-largest economy must look to exports to provide these jobs suggests that current economic policy might be less than optimal.
