The future of Europe 2015

European recovery gaining momentum but growing threats to regional stability

The European recovery is gaining momentum according to Grant Thornton's International Business Report (IBR). However, drawing on interviews with more than 1,100 regional executives, The Future of Europe 2015 uncovers a number of threats, from Greek debt negotiations to high unemployment, which continue to undermine European stability and long-term business growth prospects.

Europe has made some serious economic progress made over the past 12 months. The EU economy posted growth of 1.4%, not spectacular by historical standards, but a significant improvement from 2013. Having contracted, on an annual basis, for two years in a row, the eurozone grew by 0.9% last year. And both regions are expected to accelerate in 2015.

These improving growth prospects, alongside greater economic certainty and the decision by the European Central Bank (ECB) to launch a programme of quantitative easing have all helped create a much more fertile environment for businesses growth. Regional business optimism is higher than the global average for the first time in close to four years and many of the economies which required bailouts at the height of the crisis, such as Ireland and Spain, are now firmly back on track. Economy posted growth of 1.4%, not spectacular by historical standards, but a significant improvement from 2013. Having contracted, on an annual basis, for two years in a row, the eurozone grew by 0.9% last year. And both regions are expected to accelerate in 2015.

Clearly Europe is still grappling with a number of challenges from the threat of deflation and still-high debt to high unemployment and the rise of populist parties. But there is a growing sense that the economy has turned a corner, strong enough to deal with Greece exiting the single currency should negotiations break down irrevocably and ready again to take a lead in global development and innovation.

The recovery: gaining  momentum

• growth prospects have improved significantly over recent months, but remain subdued by pre-crisis standards
• some of the economies worst affected by the sovereign debt crisis, such as Ireland and Spain, are now growing robustly
• debt levels remain high, especially in Greece and Italy, but are forecast to fall
• unemployment rates are still very high in southern Europe, with more than half of young people out of work in Greece and Spain
• business growth prospects have steadily improved due to greater economic certainty and ECB action
• regional economic optimism has climbed above the global average for the first time in almost four years

 The future: still uncertain

• high unemployment and low growth are cited as the biggest threats to stability inside the eurozone, while other EU economies are more concerned with high debt and the rise of populist parties
• the proportion of business leaders wanting to leave the euro has halved to just 5% over the past 12 months
• nine in ten eurozone business leaders want to see further EU integration, compared with just one in two of those outside the single currency
• some northern European economies are less keen on further EU integration compared with this time last year
• business leaders are more worried about the impact of the UK leaving the EU, than of Greece leaving the eurozone