The improvement in global risk appetite seen in recent weeks has ensured that financial markets across Emerging Europe have enjoyed a decent start to 2012. Yet we remain doubtful that this rebound can be sustained. After all, despite some glimmers of hope in the recent data, we expect the euro-zone to slide into a deep and protracted recession, leading to the break-up of the single currency this year – an outcome that will surely quell investor risk appetite. Meanwhile, the latest economic data from the region remain pretty gloomy. Industry appears to be contracting in most countries (albeit at a slower pace than in recent months) and, with the notable exception of Russia, domestic demand remains subdued. Despite the bright start, 2012 is still shaping up to be a difficult year for the region.