Euro zone recession ending, but what has changed?
The euro zone is expected to kiss goodbye to its longest recession since the single currency was introduced on Wednesday, but it is likely to exit with a whimper rather than a bang.
Economists predict that GDP (gross domestic product) data released on Wednesday morning will demonstrate that the region concluded 18 months of recession in the second quarter of 2013,with the median forecast for a 0.2 percent expansion.
And this is not the only piece of good news for the embattled region. European markets have been relatively healthy in recent months, with major indices including the FTSE 100, the German Dax and France's Cac up significantly in July. And German economic sentiment, often a good forward indicator for the health of the euro zone's third-biggest economy, hit a four-month high on Tuesday.
(Read more: Euro zone seen growing at last)
Yet many are warning that this is a cyclical, rather than structural, recovery. "The evidence is too tentative to think that a sustained upswing is on its way," analysts at Morgan Stanley wrote in a note this week. Euro area GDP is still 1.2 percent below its 2011 peak and 3 percent below the 2008 peak.
There are very few really optimistic predictions out there,with most economists hedging their bets on a weak recovery as the best case scenario.
The downturn was relatively shallow, and policymakers in the euro zone threw plenty at the situation,including 1 trillion euros ($1.3 trillion)in cheap loans to help fuel markets.
Still, the dynamics of money and credit growth have stayed"extremely subdued," as economists at Credit Suisse pointed out this week. This means, in essence, that the money being lent to the banks is still not making its way to the man on the street.
(Read more: Banks holding on to crisis loans)
The threat of political risk is still hovering over the markets. Robert Parker, senior adviser at Credit Suisse, has highlighted the German election of September 22 as a potential "risk point." France, Portugal,Greece, Spain and Italy still have governments that are particularly vulnerable to external and internal pressures, he added. With the four biggest economies in the region at risk of faltering, the euro zone is still far from out of the woods.
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