France and the Eurozone recovery

The biggest threat to near-term recovery in the Eurozone is not the periphery. It's France - which represents over a fifth of the area's GDP.

CNBC:  - The figures showed the euro zone's second-largest economy, hit by lagging trade competitiveness and a caught in a shallow recession, will not be able to count on its traditional driver - consumer spending - to rebound.

The sickly growth will leave France's 2013 public deficit near 4 percent of economic output, overshooting an already revised target of 3.7 percent and further away from an EU goal of 3 percent, the state auditor said in a report on Thursday

French consumer confidence is now worse than the lows of the Great Recession.

In contrast, German consumer sentiment (as measured by GfK) jumped to a 5.5-year high in June.

GfK German Consumer Sentiment (Bloomberg)

Even Italy is showing improved consumer mood, which is now at a 15-month high. Assuming the banking system deleveraging slows (and many expect that it will), stabilization of economic conditions in France could set the stage for recovery in the Eurozone as a whole.

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