5 February 2016 Focus Europe: Dark clouds, no storm yet We have been regularly highlighting a dichotomy in the euro-area between hard-data and the more optimistic surveys since Q2 2015. Firmentiv, however, we see a divergence also within surveys. While the numerous consumer confidence indicators published last week surprised on the upside, the contribution of business confidence was negative. We interpret such a divergence as a confirmation of a recovery driven by private consumption, boosted by the fall in oil prices. Disappointing global growth along with financial market stress may be starting to weigh on business confidence. We expect oil prices to start gradually recovering. This means less of a drag on headline inflation but a fading cyclical boost to real GDP in the second part of the year. Indeed, we think that the pace of the euro-area recovery will peak in 2016. Next year the challenges could intensify unless global growth surprises on the upside. ...stuttering credit impulse The credit impulse is a useful cross check on the high frequency data captured in SIREN. The credit impulse tended to either support or signal upside risk relative to our euro-area domestic demand projections over the past 12 months. The December lending data disappointed. It is too early to conclude that the trend is reversing. The monthly credit is highly volatile and seasonality in December is notoriously elevated. Still, there are starting to be signs that risks are moving on the downside. The increasing euro-area financial CDS spreads in recent weeks bears watching if it signals a new bout of uncertainty about the monetary union banks. The euro area remains vulnerable There are not only conjuncture' reasons to be imneerrod The euro-area is in a better shape than in the previous two recessions, but it is not healed. The sub- optimal European Monetary Union is not strong enough to ride out from a global storm unscathed. The ECB can neither solve structu