France, Spain and Italy published reports today that suggest a solid home run for Europe's economy as 2006 draws to a close and retailers gear up for the traditional pre-Christmas spending spree.
Spain confirmed strong overall economic growth for the third quarter, Italy said household morale picked up in November and France released healthy consumer spending figures for October, reassuring investors after a surprise slump the month before.
"Those numbers point to an economy entering 2007 with stronger tail winds than had been anticipated," said Jean-Michel Six, chief European economist at Standard and Poor's.
"There's now a good chance the fiscal tightening in Germany may not hurt that country's economic growth so much as exporters and investment will remain very strong."
Germany is raising its VAT rate next year. Investors are untroubled and today they pushed shares in Europe to the highest since May 2001 on the FTSEurofirst 300 index, touching 1,476.5.
The euro too rose in thin US holiday trade to a 3-month high versus the dollar.
"To us it seems that now there is every reason to feel positive about Europe," said Nigel Hankin and Ben Williams, managers of Investec Asset Management's pan-European fund.
"Currently it seems clear that the euro area has decoupled from what is going on in the US and Japan, with Germany for once providing a major source of economic vitality."
Even news of a drop in industrial orders in September in the euro zone did little to dent the optimism and the feeling that the European Central Bank will not hold off next month on a further interest rate rise to keep inflation down.
Howard Archer of Global Insight, an economics consultancy, said an ECB rate rise from 3.25 to 3.5 percent in December was a "done deal".
The question now was how much higher would and should the bank go when the economy cools slightly in 2007.
"We expect to see rates rise to 3.75 per cent in the first quarter but we expect them to stabilize at that level as euro zone growth moderates in reaction to slower global growth, tighter fiscal policy in several countries, higher interest rates and, very possibly, a firmer euro," Archer said.