Eurostat has released preliminary first-quarter growth figures, and they aren’t pretty, underscoring the massive disconnect between the real economies and markets in Europe.

In the euro area, the country growing fastest was Slovakia, at 0.3 percent compared with the previous quarter, followed by Germany and Belgium at a whopping 0.1 percent. France, meanwhile, went into a triple-dip recession, with gross domestic product falling 0.2 percent.

To be fair, Ireland hasn't released its preliminary gross-domestic-product estimates for the first quarter of 2013 yet, and may well outperform Slovakia. The data are grim for the other peripheral countries, though. Compared with the previous quarter, Spain and Italy both contracted by 0.5 percent, Portugal by 0.3 percent and Cyprus by 1.3 percent.

Greece only produces year-on-year figures, which just makes them look more depressing: GDP contracted 5.3 percent in the first quarter of 2013, compared with the same period last year.

Growth is absolutely key to debt sustainability, yet markets in Europe don't seem to care. Nowhere is this clearer than in Greece. On the same day that the Greek statistics agency announced the economy is now smaller than it was in 2005, the Greek government’s borrowing costs for 10-year paper fell about a percentage point.

This is partly because Fitch Ratings upgraded Greece one notch from CCC to B- yesterday -- still well and truly in junk-bond territory. But fairly compressed yields across the periphery cannot be explained this way. This is the effect of loose money.

The U.S. and Japan have been easing policy (and printing money) aggressively, and investors awash in liquidity are looking for high-yielding products. As long as investors think the risk involved in investing in peripheral euro-area debt is worth the reward, the disconnect between the real economies and markets in Europe will persist.

(Megan Greene is a Bloomberg View columnist and chief economist at the consulting firm Maverick Intelligence. Follow her on Twitter.)

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