The unhelpful divergence between France and Germany

Data released last week suggested that the euro-zone recovery gained more traction at the start of Q2. But there remains a worrying divergence between France and Germany which risks holding back the broader recovery.

Meanwhile, last week’s successful bond auction increased the probability of Portugal exiting its bail-out without the need for a precautionary credit line from the EU. But against a backdrop of deflation, we suspect that a clean break from Portugal’s bail-out now would prove to be relatively short-lived and more financial assistance is likely to be needed in the future.