There's little doubt a sharp fall in the single currency could lift the euro zone growth outlook, but the impact is far from clear cut, analysts say.
The euro (Unknown: EURBA=) has shed almost 25 percent of its value against the U.S. dollar in the past year to trade around $1.06. On a trade-weighted basis, the decline is smaller, at around 13 percent, but is still seen viewed by economists as a sizeable fall.
This drop - helped by massive monetary stimulus from the European Central Bank (ECB) and a fall in oil prices - has prompted some forecasters to raise their outlook for euro zone growth, as well as put the zing back in euro zone stocks.
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The pan-European Euro Stoxx 600 Index (STOXX: .STOXX) has surged almost 16 percent this year compared with a 1 percent gain in the S&P 500 - a braod measure of U.S. stocks.
Plus, look at investor sentiment in Germany, Europe's biggest economy. It rose to its highest level in just over a year in March, closely-watched figures from the ZEW institute showed Tuesday.
"Over the last two years, the ZEW index has returned as an interesting and more reliable indicator for future economic growth," ING-DiBa Chief Economist Carsten Brzeski said in a research note.
"While between 2010 and 2012, the fundamental and structural strength of the German economy prevailed, it is now cyclical factors like dropping oil prices, a weakening euro and the ECB QE [quantitative easing] which are the most important growth drivers," he added.
Rule of thumb
The ECB estimates that a10 percent depreciation in the value of the euro gives annual gross domestic product (GDP) in the euro zone a roughly 0.4 percent boost and raises inflation by 0.6 percent.
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That's good news for a region that has suffered lackluster growth for years and been at risk of deflation in recent months.
UBS last week lifted its 2015 euro zone GDP growth forecasts to 1.6 percent from 1.2 percent.
Meanwhile, data on Tuesday showed consumer prices in the euro area rose 0.6 percent on the month and fell 0.3 percent on the year in February-a decline less sharp than the 0.6 percent year-on-year fall seen in January.
Still, economists say there are some important caveats to consider when assessing the soft euro's impact.
For one, the benefits of the weak currency are unlikely to be felt throughout the 19-member euro zone, including uncompetitive, smaller countries such as Greece that need economic growth to help tackle their debt mountains.