The euro zone might be clouded by political uncertainty with fears of populist victories in key elections across the bloc. But not so fast, says Deutsche Bank, none of these risks should end up materializing, allowing a pickup in growth in the second part of this year and the European Central Bank to start winding down its stimulus program the following year.
However, investors should keep an eye out for Belgium, France, Italy, Spain and Portugal, the bank said.
"Our baseline scenario for Europe has high political uncertainty weighing on activity in (the first half of 2017) H1'17 but no political risks materializing. This should release an acceleration in economic growth into H2'17 and 2018 and trigger ECB tapering," Deutsche Bank said in a note released Friday.
The bank noted that the euro area has surprised on the upside showing robust economic data. If indeed, political risks do not materialize, "further positive momentum could be added to what may already be a stronger-than-expected cyclical recovery," the bank said.
Ben Gutteridge, head of fund research at Brewin Dolphin told CNBC on Monday that "the ultimate fears that we have about euroskeptic parties taking control this year are, I think, unfounded."
He added that the current headlines are "buying opportunities because ultimately we don't see these euroskeptic leaders seizing power."