RECOVERY (noun): restoration to a former or better condition. The euro zone is at last enjoying an upturn. Economists are savouring the unaccustomed pleasure of revising their growth forecasts up, rather than down. Surveys of business activity have reached a four-year high and euro-area consumers are feeling a lot more confident. Investors are excited, too. Money is rushing into the region’s stockmarkets. In March European equity funds notched up record inflows. Alas, the euro zone is still a long way from meeting the dictionary definition of a recovery. Indeed, investors’ swing from gloom to europhoria appears already to have gone too far.

To start with, the recovery remains remarkably weak. The euro area has actually been growing for two years since an extended double-dip recession ended in early 2013. Yet the expansion has been so desultory that it barely deserved the name. The excitement generated by growth of just 0.3%, an annualised rate of little more than 1%, in the fourth quarter of 2014 tells its own story of shrunken expectations. So feeble has the recovery been that euro-zone GDP in late 2014 was still 2% below its previous pre-crisis peak in early 2008. By contrast, America’s output is higher by almost 9%.

Having lost so much ground, the euro area clearly has enormous scope to catch up. Yet its recent improved showing depends on two engines that are likely to run out of steam. The first is the oil-price collapse in the second half of 2014, which has acted like a tax cut for consumers and businesses. That stimulus will fade towards the end of this year, and will go into reverse if oil prices move up again.

The second engine is the fall in the euro, by 12% on a trade-weighted basis over the past year. Many European firms have done a good job of expanding their foreign sales in recent years (see article); they will do well from a weaker currency. But the euro has stopped falling (at least for the time being) and, in the long run, what matters more for exporters is growth in their trading markets. With China slowing and the American economy causing concern (see article), the outlook is less favourable. Ideally, recovery would also be based on strong demand within the euro area—especially in Germany, which is running a current-account surplus of over 7% of GDP.

True, investors will continue to benefit from the European Central Bank’s generous programme of quantitative easing (QE), which began in early March. QE has boosted equity and bond markets—Germany’s DAX index is up by more than 20% since the start of the year, for example. But banks play a bigger role than capital markets in providing funds to euro-zone companies and households. And although lending to the private sector is beginning to edge up, loans to firms are still falling.

Explore our interactive guide to Europe's troubled economies Moreover, one of the main achievements in improving euro-zone governance, the creation of a single banking supervisor under the auspices of the ECB, is a double-edged sword. Compared with complaisant national regulators, it is more insistent that banks are strong: witness an incipient clampdown on the use of deferred tax assets (a kind of credit to offset past losses) to bolster the capital bases of banks in Europe’s weaker economies. Welcome though that is, credit will not take wing while banks are still repairing their balance-sheets.

Grexcruciating

And don’t forget Greece. Markets have been insouciant about the tensions between the radical-left government of Alexis Tsipras and the rest of the euro zone. Greece is running too short of cash to be confident of avoiding a “Grexit”. The fraught negotiations between Greece and its European creditors highlight how hard it is to reconcile the interests of the currency union’s disparate members.

After years of bad news it may seem churlish to belittle signs of brighter prospects. Countries like Italy (see article) have made welcome efforts at reform; the QE programme is useful in bolstering inflation expectations. But neither France, the second-biggest economy in the currency bloc, nor Italy, the third-biggest, is expected to muster growth above 1% this year. And the longer-term prospects for the euro area remain weighed down by excessive debt and low productivity growth, as well as the threat of deflation and disadvantageous demography (Germany’s working-age population will be shrinking as fast as Japan’s by 2020). According to the IMF, the euro area’s potential rate of growth has deteriorated since before the financial crisis of 2007-08 by more than that of other advanced economies. However welcome, an upturn should not be mistaken for a renaissance.