IS EUROPE about rise like the phoenix out of the ashes of the last recession and become the a global economic superpower? And is Wall Street's roaraway success about to judder to a halt and bring to an and America's "new economic paradigm"?
Or, in the more prosaic language of the people who analyse and study the subject, is the global economy finally starting to rebalance?
A positive set of European manufacturing, inflation and consumer- sentiment data and the first United States rate rise for 27 months last week were encouraging signals. It is vital that Europe's economies - and therefore its beleaguered currency - do mount a recovery. The United States, with its cocktail of high growth, low inflation and low unemployment, has acted as consumer of last resort since the Asian crisis started in 1997. Although the momentum shows little sign of slowing, if there is to be another crash, it must be on Wall Street. As Paul Volcker, the former Fed chairman is reputed to have said, the global economy depends on the US economy, which depends on Americans continuing to spend, which depends on the performance of the stock market, which depends on 50 companies - 25 of which have never made a profit. This must be a cause for concern at the very least. Figures last week only gilded the lily. The NAPM manufacturing survey was so high it would have translated into 4.7 per cent GDP growth, while non- farm payrolls on Friday were above forecasts. In Europe it is a very different story. A manufacturing recession has dragged down the economies of the 11 countries in the eurozone. The industrial sector, which accounts for a third of total GDP - but two thirds of its variability - was punished by the collapse in exports to Asia. In April it fell 0.7 per cent, led by Germany down 1.7 per cent and Italy down 2.3 per cent. The UK fell 2.4 per cent. In April the European Central Bank, then only four months old, slashed the Euroland interest rate by 50 basis points to 2.5 per cent. Faced with the sharp contrast between a strong US economy and the hesitant performance in Europe and the likely path for interest rates, the euro slumped. To make matters worse last month, as the euro hit a new lifetime low against the dollar, Europe's finance ministers and central bankers started issuing contradictory statements on whether the ECB would intervene to prop up the euro, damning its credibility. On Thursday, the day that the ECB celebrated its six month anniversary, the euro almost fell through the $1.02 mark and has depreciated 11 per cent this year. As we start the third quarter of the year, there are promising signs. On the public relations front, the ECB and the member states are now singing from the same hymn sheet - that the euro's fall is a cyclical problem and not a sign of structural problems or even a lack of credibility. Manufacturing grew in June at its fastest rate since last September, according to the Euroland purchasing managers index. Although Germany, the largest and most uncompetitive economy, actually contracted, its government has announced plans for an austere fiscal tightening. …