The improvement won’t last, but you can make some money now euro_030315Greece is about to exit the euro. A wave of populist anti-euro governments are about to be elected. The currency is sliding towards parity with the dollar, while unemployment is grinding upwards, and deflation is taking hold. Anyone following the headlines out of the eurozone in the last few months could be forgiving for thinking the continent was sliding into another depression. But here’s a surprise. The eurozone economy is about to perk up. Already there are signs that it is improving, with jobs being created in Spain, the tills ringing at German shops, and with prices no longer falling at such a rapid rate. Europe is receiving a powerful stimulus from the fall in its currency, and that will get rocket boosters this month with the long-awaited launch of quantitative easing by the European Central Bank. By the summer, that is going to create something that looks very like a proper recovery. In fact, it is only a dead-cat bounce. All the long-term structural issues within Europe remain as serious as ever. But a bounce is still a bounce, whether the cat in question is alive or dead. Just because it won’t last doesn’t mean that there are not some short-term gains to be had in Europe. Where should you be looking? Burnt-out economies such as Italy and Portugal are the most promising national markets to explore, while cyclical stocks will benefit most from the upturn ahead. Although it does not capture the headlines like the day-to-day dramas of the Greek crisis, and the rise of anti-euro protest parties, the more mundane, day-to-day economic news has turned a lot brighter in the last few weeks. On Tuesday, we learned that Spanish unemployment dropped by 13,000 last month, or 0.3%, as factories and building firms took on more staff. That was the biggest monthly drop since 2001. German retail sales hit a seven-year high, up by 2.9% month-on-month in January, the biggest monthly jump since 2008. The day before, on Monday, we learned that unemployment across the eurozone fell to 11.2% in January from 11.3% in December — not great, but at least it is starting to fall. Inflation was reported at minus 0.3%, compared with minus 0.6% a year earlier — prices are still falling, but not nearly so rapidly, and those figures suggest they could soon be stable again. Purchasing managers’ index data was positive across most of the region, with Ireland at a 182-month high, and with France the only major country to still be grappling with declining industrial confidence. Last week we learned from the ECB that bank credit, while still shrinking, is not contracting as rapidly as it was. So is the euro crisis fixed? Not exactly. In fact, two things have happened. The first is a substantial fall in the currency, partly engineered by ECB President Mario Draghi. The rate against the dollar EURUSD, -0.28% has fallen from a peak of a $1.40 last year to $1.12 now. That is a hefty fall. For major manufacturing and exporting nations such as Germany, France and Italy, that makes a big difference. It is not just against the dollar that the euro is down. It has fallen against the pound EURGBP, -0.11% — significant because the U.K. is a huge export market for Europe — and against every other major currency as well. European goods are suddenly a lot cheaper around the world, and that, as you would expect, is starting to fill order books. Next, there is a cyclical upturn. The rest of the global economy is growing at a respectable pace this year and the eurozone has finally caught up. Just because an economy is in long-term decline does not mean that it is suddenly exempt from the business cycle. Just take a look at Japan over the last 25 years — there have been plenty of ups and down even within an economy that is basically going nowhere. Europe has been in a depression, with output still below its 2008 levels, but it is witnessing a cyclical bounce back as the rest of the global economy strengthens. That upturn is about to boosted further by QE. After months of speculation, and a torturous decision-making process, the ECB is going to start printing money this month. In total one trillion euros of bonds will be bought by the central bank. Nobody can describe QE as unchartered territory anymore. It has been tried in the U.S., Japan, and the U.K., and although its precise impact will be debated in university lecture theaters for years, it certainly makes a difference to asset markets, lowers the exchange rate, and feeds through to the real economy through those two channels. It is more marginal than you might hope — but it does make some difference. With some momentum gathering already, it should give the eurozone economy another useful boost. No one should expect anything dramatic. By the autumn, however, Europe could be growing by around 1.5%. That doesn’t mean the eurozone is fixed of course. Even if unemployment is slowly starting to come down, total employment across the zone is still 2.2% below its 2008 levels. The region has fewer people in work than it did seven years ago. Output has yet to recover its pre-crisis levels, and crippling youth unemployment rates in countries such as Spain and Italy mean a whole generation is missing all the skills that come from having a job — and may never acquire them. Even so, a recovery is still a recovery. Shutterstock.comPortugal has clawed back some its competitiveness. Asset prices have been ground down by the crisis, and are cheaper in the eurozone than the U.S. or the U.K. So where should investors be looking? Portugal was one of the countries that had to be bailed out, but has managed to claw back some of its competitiveness. Italy has always been home to plenty of world-class businesses, but the Milan index FTSEMIB, +0.07% has been dragged down by a terrible domestic economy. Elsewhere cyclical stocks across Europe will benefit most from the recovery. The eurozone may well be back in trouble by 2016. But for the moment, it has a lot of catching up to do with the rest of the world — and investors should get on board. Matthew Lynn