​JP Morgan’s Goldberg: Don’t break out the champagne yet over European recovery


JP Morgan global market strategist Andrew Goldberg says that while the worst of the eurozone recession is over, there are still “depression-like” conditions in many of Europe’s peripheral economies.

Last week, statisical agency Eurostat released figures showing the eurozone economy grew by 0.3 per cent during the second quarter of 2013, marking the technical end of the region’s longest ever recession, which lasted 18 months.

Goldberg agrees that the recovery is underway in Europe but highlights “serious concerns” about the state of the economies in certain European countries.

“Yes the European recovery has begun, but there are still really serious Qs about how sustainable the situation is and I think there are still depression-like conditions in Spain and Greece,” he says.

“It is important that investors understand that the recovery is underway in Europe but you can’t break out the champagne yet.”

In particular Goldberg highlights the high unemployment and youth unemployment which still exist in some European countries, and the impact this has on overall economic progress.

He says: “The unemployment rate for young people, those under the age of 25, is a huge problem in an economy because basically in the long run an economy can grow based on how much the labour force grows, in addition to how productive that labour force is.

“With Europe, if that many unemployed people are essentially not working, it raises real concerns for us. Countries such as Spain and Greece still have unemployment rates well over 25 per cent.”

Meanwhile, markets remain focused on the fact that the worst of the European recession appears to have past, says Goldberg. He adds: “Market won’t wait for the absolute all-clear that the European recession is over.

“What they will see though is that the worst is now behind us in Europe and now is the time to price for slightly better information.”