LONDON -- The eurozone economy, for so long a source of uncertainty, has enjoyed its best year of growth in a decade, clear evidence it has broken out of the prolonged debt crisis that raised fears about the very survival of the euro currency.
In its first estimate for the fourth quarter, Eurostat, the European Union's statistics agency, said Tuesday that the 19-country single currency bloc expanded by 0.6 per cent in the October-December period from the three months before.
That more-than-healthy level of growth means that for the whole of 2017, the eurozone economy expanded by 2.5 per cent. That was up from 2016's 1.8 per cent growth and marked the eurozone's best performance since 2007, when it grew 3 per cent. And for the second year, the eurozone even grew faster than the U.S., which expanded by 2.3 per cent in 2017.
"Economic growth has shifted to a substantially faster growth path over the course of 2017," said Bert Colijn, senior eurozone economist at ING. "While detailed breakdowns have yet to be released, it seems that the eurozone economy continues to fire on all cylinders."
In the decade since 2007, 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 World War II. 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. The Greek economy, for example, shed around a quarter of its output, and saw unemployment and poverty levels ratchet higher.
It's only recently that existential concerns surrounding the euro have eased. Greece, notably, is set to emerge from its bailout era this summer, eight years after it first faced potential bankruptcy.
With fears of a breakup of the eurozone largely evaporated, confidence across the bloc has risen. That's evident in the fact that growth isn't just reliant on the big economies of Germany and France. The latter has notably picked up steam since the election of the reform-minded President Emmanuel Macron last May, growing 1.9 per cent in 2017, its highest level since 2011, largely thanks to investment.
As well as a strong "core," growth is better also in those countries that were at the forefront of the crisis. And that's helped bring down unemployment in the bloc to a near nine-year low of 8.7 per cent, a development that has the potential to further reinforce the recovery in the year ahead.
Many credit the defeat of several populist political movements in elections in 2017, such as in France and the Netherlands, for the more benign economic environment. That has eased fears about the prospect of anti-euro politicians taking the helm and reigniting concerns about the euro's future.
Meanwhile, the recovery has been boosted by the European Central Bank's massive stimulus program and its move to slash interest rates. Predictions that Britain's vote to leave the European Union could entice other countries to leave the bloc or even hurt its economic growth appear wide of the mark.
And the wider global economy -- in particular trade -- is also on the up, supporting the eurozone's exporters.
That combination of positive factors is expected to hold in 2018 and growth is anticipated to come in around 2017's level.
Potential headwinds include the recent rise in the value of the euro, particularly against the dollar, which makes eurozone exports less competitive in international markets. Following the growth figures, the euro advanced further towards its recently hit three-year high-rate against the dollar, and was trading 0.2 per cent firmer at $1.2413.
Other risks include the prospect of less stimulus from the ECB and a marked deterioration in the Brexit discussions that could damage the eurozone economy as well as Britain's.
And if the last few years are anything to go by, the political risk will remain alive. The next potential hurdle is the Italian election in March, when euroskeptic parties are predicted to do well, though not win outright.
"Even if Italy's election delivers a shock on March 4, a renewed eurozone crisis is unlikely," said Luigi Scazzieri from the Center for Economic Reform. "Italy's ability to tread water is notorious and the international economic context remains favourable."
