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The euro area economy has continued to gain traction. Sentiment has picked up in an increasing number of sectors, even suggesting that the employment and investment outlook in most member countries may gradually get brighter. According to the European Commission’s latest Business Climate Indicator, annual GDP growth for the currency union should move back into positive territory by year-end. So all in all, things look fairly good.

But there’s a missing ingredient: better export performance. Not only are sales to the rest of the world marking time, but trade within the currency bloc has contracted further—an unusual occurrence in a recovery phase. The main explanation for this lies with persistently stagnant demand in Germany— a major obstacle to any real improvement for the regional economy as a whole.