As official negotiations about Britain’s exit from the European Union began this week, the remaining member states appeared to be in a robust position. The euro-zone economy, in particular, is still growing at a healthy pace and outperforming the UK. And the UK has moved in the EU’s direction by agreeing to discuss the rights of citizens and financial obligations before trade talks begin.
We expect UK growth to gain pace in the coming months, supporting demand for euro-zone exports. And while the UK still seems set to leave the Single Market, the likelihood of a softer Brexit involving a trade deal in return for continued financial contributions has probably increased, which would be a good outcome for the EU. But uncertainty surrounding Brexit remains a risk to the euro-zone outlook.
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