Barring major surprises on the energy and food price front, we expect headline inflation to slide gradually towards 2% during the spring.
There is a risk (to the recovery from the VAT hike) but since we are seeing stronger growth then there is a bigger chance that the German economy can actually withstand it.
Italy needs radical reform to cut its unit labor costs and regain competitiveness, but that can be a very painful process.
What we have seen over time is a gradual pickup in underlying growth momentum. The strength we were seeing earlier in the year in the export side has started to spill over to investment.
All available indicators of retail activity are moving in the direction of improving household spending.
