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Goldman: How Europe outperforms in 2014

Investors should look toward European equities to outperform in 2014 as companies based there continue to see profit growth, despite relatively weaker overall economic progress, Goldman Sachs' Peter Oppenheimer told CNBC on Tuesday.

"We're pretty optimistic of equity markets still," Oppenheimer said on "Squawk on the Street." "Clearly there's been a big period of outperformers of equities relative to government bonds. We expect that to continue."

Oppenheimer, the chief European equity strategist for Goldman Sachs, said that European stocks that were "very cheap" and drove a significant amount of foreign influence into equity markets there should return to a "typical modest discount relative to the U.S."

He also appeared bullish on the eurowhich has stabilized since the peak of the European debt crisisand forecast the euro zone to have 1.1 percent year-over-year growth in 2014 that will lead to 1.5 percent growth in 2015.

(Read more: Europe tries to cut deal to close failing banks)

Gavin Hellier | Getty Images

"In many ways the strength of the euro is a problem in itself, because so many of the companies are dependent on activities outside of Europe," Oppenheimer said. "This is true for the U.K. companies. This is true for euro zone companies."

Goldman's chief European economist, Huw Pill, told CNBC that economic reforms in Spain after the peak of the European debt crisis have taken hold more so than in France and Italy. As a result, he holds a positive medium-term outlook for the economy there, adding the reforms and financial restructuring have weighed heavily on current problems, such as high unemployment.

(Read more: Euro advances as dollar, yen stay out of favor)

"So we're not that optimistic on the short-term outlook for growth for Spain," Pill said on "Squawk on the Street." "But we do think because of the reforms, quite a lot of opportunities have been created beneath the surface. And looking 18 months down the road, that's a country where there's grounds for more optimism."

Pill said he remains bullish on the U.K.'s prospects because of steady stimulus efforts from its central bank. He said countries that did not embrace reforms may suffer in the long term.

(Read more: Euro zone gets manufacturing boost, France drags)

"If you look to France and Italy, it's more of a mixed story," Pill said. "We see less progress there with reform. And even though the shorter-term outlook might be a bit more positive, without that reform, without that consolidation, without that deleveraging, I think there's concern over the medium term."

—By CNBC's Jeff Morganteen. Follow him on Twitter at @jmorganteen and get the latest stories from "Squawk on the Street."

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