by David Roche
The European economy is headed for recovery. The consumer is spending again and exporters will do better from synchronized global growth. What's more, the state is gradually loosening its icy grip on free enterprise. Above all, the European Central Bank won't raise interest rates, while the Federal Reserve will hike them by another 50 to 75 basis points before the year-end. So I reckon European financial assets will outperform those in the US over the rest of this year.
In the eyes of many investors, the long-run underperformance of European financial assets has been richly deserved. EU wages are too high, labour legislation is horribly rigid and unions still hold sway. Europe's welfare-state mentality is largely to blame. The public sector spends too much, taxes too much and has too much debt. And European industrialists make the wrong products in the wrong places at the wrong price. So they sell their wares to the only people that can afford them - overpaid European consumers. The euro's disappointing debut has confirmed the worst fears of those doomers and gloomers.
But beneath the surface, there are signs that the outlook for Europe is improving - and rapidly.