So how has the European economy been performing lately and were our predictions on GIS correct?
As we anticipated in late 2013 and throughout 2014, the picture is relatively simple with troubled countries which failed to carry out substantial reforms, such as France and Italy, stagnating, writes Professor Enrico Colombatto.
Those economies which were in trouble but have started bringing about some changes, like Spain, have shown encouraging signs of improvement. And countries which were substantially sound, like Ireland and Germany, have resumed growth at a satisfactory pace.
The expansionary monetary policy carried out by the European Central Bank has played an important role. Nonetheless, our fears about the consequences of this have been confirmed in many contexts.
In general, those who have benefited from printing money have been the banking industry and public debtors.
Their response has been close to our predictions. With few exceptions, banks and governments have failed to take advantage of the newly printed money to put their houses in order.
Today there is no immediate threat of a financial meltdown in Europe. However, the threat has subsided because bad debtors, and bad investors, have been bailed out - not because their health has improved. There is little room for complacency.
When bad players survive, new players are stuck on the sidelines, competition is stifled, regulation intensifies and the chances of quick recovery disappear.
Unsurprisingly, this reflects badly on the exchange rate. It did not take long, as GIS predicted, for market agents to realise that productivity growth in Europe was disappointing, the many promises of real economic growth in the eurozone were empty, and that injections of new euros continued unabated.
The perceived lack of vision and leadership within the Old Continent has added to the uncertainty. We know what happened next - investors dumped their euros and went for safer harbours such as dollars…. watch this space.
We have no crystal ball, and predicting the future is risky. But informed reasoning suggests we should see no major changes in the near future.
We believe recession is now over, but significant rebounds are not in sight.
Europe will certainly benefit from the weak euro and cheap oil, as we argued in the past, but it is no time for Europeans to celebrate. The drop in oil prices was not our doing, and the drop in the euro is the result of our weakness, not a sign of health.
Many European policymakers now have more time to do their homework. But they should hurry up if they want to avoid ongoing stagnation and potential political turmoil.