When the recession hit last year, European governments were at odds over how to coordinate their fight against the global crisis. Despite that initial dissonance, the countries sharing the euro now seem to be heading towards recovery at a surprisingly similar pace.
Economists say fiscal and monetary boosts across the zone made the difference in helping to pull the continent from its worst recession in the post-war era.
Signs of a burgeoning recovery have been showing up in indicators across Europe in recent weeks. Manufacturing orders, purchasing managers indices, exports and the European Commission's own economic sentiment indictor have all turned positive. The euro zone's major economies, Germany and France, have posted a return to economic growth.
short-term indicators
"There is no mistaking the message emitted by the short-term economic indicators: the euro zone economy moved back from contraction to expansion this summer," Commerzbank economist Christoph Weil wrote in a recent report. "The Euro zone recovery is the real McCoy," he wrote.
Another sign that things might finally be returning to normal came Friday in Germany, the euro zone's largest economy, where October consumer confidence data showed signs of economic recovery were offsetting fears of unemployment.
"The future outlook of consumers is becoming increasingly optimistic, with economic expectations rising for the sixth time in a row," the Nuremberg-based GfK market research group said in its report.
There was little of this cross-continent optimism only a few months ago, when EU members' go-it-alone responses to the crisis led to charges of xenophobia and protectionism. EU Commission President Jose Manuel Barroso also weighed in with a vigorous warning against economic nationalism. The appeals appeared to be a criticism and rejection of French President Nicolas Sarkozy's moves to shield French companies in the wake of the crisis.
fiscal stimulus measures
Protectionism worries still exist, some directed at Germany for sponsoring Magna International Inc's takeover of GM subsidiary Adamp Opel GmbH. But economists across Europe credit the turnaround to the massive fiscal stimulus measures introduced in the wake of last year's financial crisis - in particular, the cash for clunkers programmes to get people buying cars.
"The fiscal stimulus, no question about that," said Gilles Moec, senior European economist at Deutsche Bank in London. He cited various "cash for clunkers" programmes in France, Germany and elsewhere, which gave car buyers incentives to trade in old, polluting vehicles for newer, cleaner models. That revitalised a European new car market that had all but stalled.
Stimulus measures such as this "had quite a noticeable impact on industrial output and gross domestic product in the second quarter, for instance in France and Germany," Moec said.
The European Commission said early this month that the euro zone and the 27-nation EU likely pulled out of recession in the third quarter. Germany and France kicked off the trend by posting 0.3 per cent growth in the second quarter.
The 16 nations that use the euro fell into recession in the second quarter of 2008, the first since the currency was launched in 1999 and the worst for euro nations Germany and France since World War II.
eight-month slump ended
Green shoots pushed through this summer as business and consumer confidence figures ended an eight-month slump in July with companies and shoppers more optimistic about the months ahead. Businesses said they expected orders to pick up as firms ended a spending freeze and started to restock.
But this has been slow to translate into a full-blown recovery as industrial output keeps shrinking - but at a lesser pace than earlier this year. Unemployment has hit a 10-year high - and is still rising.
EU officials and economists warn that the upswing is fragile. They predict that the euro zone and the EU could grow 0.2 per cent in the third quarter compared to the three months previously, and may only expand a moderate 0.1 per cent in the final quarter of this year.