In particular, the prospect that a necessary cyclical adjustment was now behind us fostered increasing levels of optimism, which were manifested in a fall in bond risk spreads and a rise in stock prices.
Central to this debate is whether the slow growth can be attributed to cyclical – and hence ultimately transitory – factors related to the financial crisis, longer-term structural factors, or a combination of both, whereby cyclical factors have over time turned into permanent factors, for example via hysteresis effects. Longer-term structural factors have certainly been at play in the euro area.