A recovery in the euro zone economy is in full flow, but the region still has a long way to go in addressing some of its imbalances, says Silvercrest Asset Management.
"The recovery in Europe is real, and will likely continue and strengthen. But it is also fragile, and that fragility may give rise to new episodes of uncertainty, like the mini-shock that resulted from last year's Cyprus bailout," said Patrick Chovanec, Silvercrest's managing director and chief strategist, in a note titled 'Is Europe's Crisis Over?' published Thursday.
"More importantly, the internal imbalances that gave rise to the euro zone crisis have yet to be resolved, which places a serious limit on the contribution that Europe can be expected to make to global growth," he added.
Optimism towards the euro zone has picked up over the past year as the region showed signs of emerging from a financial crisis that started with the collapse of Iceland's banking system in 2008 and spread to Greece, Ireland and Portugal during 2009.
The euro zone economy grew 0.3 percent in the last quarter of 2013 from the previous one, after a 0.1 percent rise in the third quarter. There have been some positive signs early this year. For instance, the European Commission's economic sentiment indicator, based on what both businesses and consumers are reporting, in March rose to its highest level since July 2011.
"We're seeing signs of that [a recovery] across Southern Europe and it's early days but the worst is behind us," said Tim Condon, head of research for Asia ING Financial Markets.