The eurozone economy has enjoyed its best year in a decade, in the first clear evidence that it has broken out of the prolonged debt crisis that raised fears about the survival of the euro currency itself.
In its first estimate for the fourth quarter, Eurostat, the European Union’s statistics agency, said the eurozone had expanded by 0.6% in the September-December period from the three months before.
That healthy level of growth means that for the whole of 2017, the eurozone economy expanded by 2.5%, its best performance since 2007, when it grew 3%.
In the decade since then, the eurozone has had to grapple with one crisis after another, starting with the financial crash of 2008 that prompted the deepest worldwide recession since the Second World War. That exposed the weak underbelly of the eurozone — the state of the public finances in a number of member economies.
Four countries — Greece, Ireland, Portugal and Cyprus — had to be bailed out by their partners in the eurozone and the International Monetary Fund, and in return they made deep budget cuts to get their public finances into shape, hitting their economies hard.
It is only recently that fears of a eurozone break-up have eased. Greece, notably, is set to emerge from its bailout era this summer, eight years after it faced potential bankruptcy.
With fears of a break-up of the eurozone largely evaporated, confidence across the bloc has risen. That is evident in the fact that growth is not just reliant on the big economies of Germany and France.
Stronger growth is being recorded in those countries that were at the forefront of the crisis and that is helping to bring down unemployment, potentially reinforcing the recovery.
Following the defeat of several populist political movements in elections in 2017, such as in France and the Netherlands, there are fewer fears about the prospect of anti-euro politicians taking the helm. Meanwhile, the recovery has been boosted by the European Central Bank’s massive stimulus programme and its move to slash interest rates.
However, the growth boon is not just about improvements in the eurozone. The global economy, in particular trade, is on the up, which is supporting the eurozone’s exporters.
That combination of positive factors is widely expected to hold in 2018 and growth is anticipated to come in around 2017’s level.
Two potential headwinds are the recent appreciation in the value of the euro, particularly against the dollar, which makes eurozone exports less competitive in international markets, and the prospect of less monetary stimulus from the ECB.