THE eurozone economy looks on track to crawl out of recession in the second half of the year, surveys showed yesterday, just as new strains in the region's debt crisis put it all at risk.
Markit's final Composite Eurozone Purchasing Managers' Index, a monthly survey of thousands of companies, rose to its highest since March 2012 last month, climbing to 48.7 from May's 47.7.
This is still below the 50 threshold for growth, but a marked improvement from lows hit last autumn. Overall, the PMIs were consistent with the eurozone economy shrinking around 0.2 percent through April to June.
While this suggested the eurozone's record-long recession may end soon, a wave of political instability in Portugal and a new bout of worry about Greece were reminders of how easily the debt crisis, dormant for the last 10 months, can reawaken.
The resignation of two senior ministers in Portugal prompted a huge sell-off in the country's government bonds, sending 10-year borrowing costs soaring above 8.1 percent for the first time since November.
It also pushed yields in Spain and Italy sharply higher.
Greece, meanwhile, has been given just a few days by international lenders to deliver on conditions attached to its bailout in order to receive its next tranche of aid.
The PMIs showed German companies managed to eke out negligible growth in June, but the surveys showed the region's peripheral economies, like Spain and Italy, still suffered a perilous rate of decline ? which worsened in the case of Italy.
"The peripheral economies have a very hard battle on their hands to return to healthy economic growth," said Jonathan Loynes, chief European economist at Capital Economics.
"Against that background, I don't think it's at all surprising to see political instability in those countries."
None of this will be lost on European Central Bank policymakers, who meet today to set monetary policy.
Although economists do not expect them to announce any major changes, any sign of a new flare up in the debt crisis could force the ECB into action in the coming months.
