The International Monetary Fund's annual report on the eurozone, published this week, contains good news and bad news. The good news is that economic recovery is in the making and that eurozone consumers are starting to spend more. The bad news is that the IMF is revising downwards its estimate of the eurozone's long-term growth potential. This is bad news not only because a yearly shortfall of half a percentage point in economic growth means a lot of lost economic opportunities but also because of its psychological effects. Consumers spend freely only if they are optimistic about economic prospects. The IMF is sending them a message that they should not be too optimistic.

Is this pessimism warranted? Or could it be that the subdued economic activity in the eurozone during the past few years has not only made consumers pessimistic but has also transformed sober economic analysts into prophets of doom and gloom? It is undeniable that, during economic downturns, pessimistic analyses about deep-seated structural deficiencies abound. Consider the US at the end of the 1980s and early 1990s: its economic performance was dismal and libraries were filled with books on the economy's structural flaws. Perhaps something similar has been going on in Europe during the past few years.