The Wood and the Trees. The Eurozone & the UK.

Over the last couple of years I’ve noticed something interesting about Twitter. If I tweet something gloomy about the Eurozone, the retweets and favourites start to rack up. But if I tweet something positive it’s greeted with silence.

That might just be the nature of news and people’s interest — ‘economy doing ok’ may be the equivalent of ‘man not hit by bus’. But it also might reflect something else — the biases and underlying views of my followers.

For the past six years it has been very easy to be gloomy about Europe. Almost any discussion of the European economy nowadays quickly turns to the dangers of falling prices and a debt-deflationary spiral. The fear is that generalised fall in prices will become self-reinforcing, pushing down wages and incomes and pushing up the real value of debt.

That is no doubt a real risk in the Eurozone and one reason why the European Central Bank has (finally!) embarked on its own programme of quantitative easing (buying bonds to try and push inflation up).

But sometimes macroeconomics can be so nuanced that it misses the wood by overanalysing the trees.

The price of oil has halved in the last 8 months. That is good news for oil importers like the UK, US and the Eurozone.

In effect this is a tax cut for consumers and firms paid for by foreign producers. It might be just the stimulus Europe needs.

Of course there will only be real economic benefits from this if consumers spend rather than save their windfalls. Today’s Eurozone retail sales data showed the strongest year on year growth in 8 years. That looks like consumers spending.

Add in a general improvement (France excepted) in private surveys of purchasing managers and a large increase in demand for credit and things start to look even better.

Rising retail sales, increasing credit demand and more buyout expectations from private firms are not what one would usually associate with the early stage of a debt-deflationary slump.

It’s important not to cherry pick data. The Eurozone labour market is still a mess and wage growth is weak.

But a combination of lower oil prices (despite a recent bounce) and a weaker Euro supporting exporters could give a further fillip top growth in the coming quarters.

And that’s before we add in the impact of the ECB’s QE. As Dan Davies has pointed out European monetary policy has been constrained for years by a broken banking system. The functioning of banking system though has improved and whilst Eurozone QE may not prove as potent as its American or British cousins, it could still have a large impact.

Add it all together and 2015 could prove to be a decent year for Eurozone growth. Of course a new crisis in Greece (assuming it was contagious) could still blow it off course and the slump has been so deep it will take time to fully recover from.

Even a couple of good years in 2015 and 2016 will not address some of the Zone’s underlying issues. But the direction of travel, whisper it quietly, might finally be in the right direction.

More parochially, a recovery in the UK’s biggest trading partner should be good news for British growth. The odds are it will be — more demand in Europe should mean more demand for British exports.

But at the back of my mind, there is a nagging worry: the UK’s current account deficit. I’ve set out before the (not immediately likely but not impossible) scenario in which investors start to fret about the UK’s reliance of importing capital from abroad.

The main reason not to worry about the current account, to assume that the rest of the world will happily continue to lend to the UK and finance that deficit has been the UK’s status as a ‘safe haven’.

Whatever problems the UK economy might have, it’s been fundamentally less ugly than the Eurozone in the global beauty contest.

So a Eurozone recovery and a resolution of the Greek issue might lead to a reassessment of the relative safe haven status.

But again, that might be a case of me overanalysing the trees. The UK’s biggest trading partner performing better would be very good news for Britain in the short term.