×

Why 2016 may be Europe's best year in decade

Growing signs of a recovery in big European economies such as France - which has long been a weak spot in the region - suggest 2016 could be the best year for the region in over a decade, according to one fund manager.

An index of sentiment in France's industrial sector rose by more than expected to 102 in July from 100 in June, the country's statistics agency INSEE said on Wednesday.


Christophe Morin | Bloomberg | Getty Images

It's the latest sign that hefty monetary stimulus from the European Central Bank, a weak euro and lower oil prices are working their magic in the euro zone, helping provide a strong buffer from turbulence in debt-struck Greece.

Read MoreTsipras rallies supporters ahead of Greek reform vote

"France is the industrial, manufacturing, business confidence laggard of Europe, so to see France turning the corner is very important," Michael Browne, fund manager at Martin Currie, told CNBC's "Squawk Box Europe" after the release of the French data.

"It means we have growth in the U.K., we have growth in Germany, Italy is clearly turning the corner and now France is coming on board."

Premature?

Asked whether it was premature to call a recovery in Europe, which has lagged U.S. economic growth for years, Currie said he saw an improvement in economic conditions in the second half of the year.

"2016, for me, looks like possibly the best year for Europe since 2005," he added. "It's been a long wait."

Economic growth in the 19-member euro zone rose 0.4 percent in the first quarter, the strongest quarterly expansion since the second quarter of 2013.

Upbeat earnings from corporates in the early days of the second-quarter earnings season also bodes well for Europe's economic outlook, analysts said.

Danish lender Danske Bank, for instance, on Wednesday reported better-than-expected earnings that sent its shares up more than 5 percent. Budget carrier easyJet, meanwhile, reported strong profit guidance.

Read MoreEasyJet says some headwinds offset by demand

Opportunity knocks

Eric Labaye, chairman at McKinsey Global Institute in Paris, told CNBC that he believed there was a window of opportunity for policymakers to raise long-term growth prospects by pushing through structural reforms.

"The context is highly positive to work on long-term transformation of Europe, which would include structural reforms to improve competitiveness, but also to work on the demand side," he said on Wednesday.

In a report published in June, McKinsey said that although economic growth in the region had been sluggish since the start of the financial crisis, a backdrop of weak oil prices, a favourable exchange rate and monetary stimulus meant the time was right to undertake ambitious reforms, boost job creation and investment.

The euro is down almost 19 percent versus the dollar from where it stood a year ago – giving euro zone exporters a competitive edge abroad.

Italy's government meanwhile has been busy pushing through reforms such as an overhaul of labor laws that was approved in December in a bid to lift an economy that has contracted for three years in a row since 2012.

France's government has also pledged to press ahead with its reform efforts and push down unemployment that remains above 10 percent.

"It may be tempting for some observers to write off Europe. That would be a mistake," the McKinsay report added.