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Watch out: euro zone recovery faces ‘serious headwinds’

Duncan Walker | E+ | Getty Images

The euro zone's debt crisis is far from over and could pose a risk to the region's recovery, according to analysts, despite its economy returning to growth for the first time since 2011 on Wednesday.

Official gross domestic product (GDP) data for the second quarter revealed that the euro zone had emerged from the longest recession in continental Europe in over 40 years. Its economy grew by 0.3 percent on the quarter, beating analyst expectations of 0.2 percent growth.

But Jonathan Loynes, chief European economist at Capital Economics, said that although the euro zone's recession is over, the debt crisis is "decidedly not."

"The return to modest rates of economic growth in the euro-zone as a whole won't address the deep-seated economic and fiscal problems of the peripheral countries," he said.

(Read more: Euro zone exits longest recession in over 40 years)

Countries on Europe's periphery – Portugal, Ireland, Italy, Greece and Spain – have been hard hit by the euro zone's debt crisis. Efforts to cut their budget deficits have led to tough austerity regimes, which have in turn hit growth prospects. Unemployment in the euro zone remained stuck its record high of 12.1 percent in June, official figures showed at the end of last month.

Loynes said that these structural problems had the potential to cause big problems for the rest of the euro zone..

"The peripheral economies remain a very long way from the rates of expansion required to address their deep-seated problems of mass unemployment and cripplingly high debt," he said. "Market concerns about these countries – and whether they could default, or leave the euro zone - could flow back again at some points, which would hit growth."

The chief European economist at IHS Global Insight, Howard Archer, agreed that the euro zone's recovery would be limited by "serious headwinds" from the periphery.

"Notably including still restrictive fiscal policies (even though countries are being given more flexibility on this), ongoing tight credit conditions amid still significant banking sector problems, very high (and still likely further to rise unemployment) and muted consumer purchasing power," he said.

(Read more: Euro zone recession ending, but what has changed?)

The euro zone's 0.3 percent euro zone GDP figure "overstated the region's economic health," Archer added, with any further growth likely to be limited.

Societe Generale economist Anatoli Annenkov agreed there were pressures on continued GDP growth in the euro zone. "While [the data are] positive, especially for confidence, we expect continued headwinds in the autumns stemming from financial fragmentation and struggles in delivering fiscal consolidation," he said.

He stressed that temporary factors, such as low temperatures which had boosted energy consumption, were unlikely to be present in the third quarter, and that the euro zone's GDP data would likely be revised – possibly lower.

French Surprise

Wednesday's preliminary estimate of euro zone GDP growth was driven by a pickup in economic growth across both Germany and France. Germany cemented its position as Europe's powerhouse, with a 0.7 percent surge in growth, while France jumped out of recession, posting expansion of 0.5 percent. Portugal's GDP also surprised on the upside, with economic growth of 1.1 percent in the second quarter.

The French data was particular interesting, according to analysts, given a recent string of downbeat economic surveys for the country.

(Read more: Euro zone seen growing at last)

"Looking through the details of the [France] report, almost every component behaved better than we projected," said Societe Generale's Annenkov. He identified consumer spending as the highlight of the GDP, which increase by 0.4 percent during the second quarter – the strongest increase since the last quarter of 2010.

Although, looking ahead, Annenkov warned that French industrial production seemed to be losing steam, adding: "Indeed, we even believe that there is a chance that French GDP will recede during the summer quarter."

Capital Economics' Loynes argued that strong French and German economies is not necessarily a good thing for Europe's peripheral counties.

"Indeed, stronger growth in the core could even have some negative effects on the periphery by maintaining an undesirably strong euro and deterring the European Central Bank from providing further monetary stimulus," he said.

Spain, Italy, Cyprus and the Netherlands remain in recession, while second-quarter GDP data for Greece and Ireland have yet to be published

By CNBC's Katrina Bishop. Follow her on Twitter @KatrinaBishop

Contact Europe: Economy

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