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Eurozone Economy Outperforms US

GDP of the 19-country eurozone bloc grew by 0.5% in the first quarter.GDP of the 19-country eurozone bloc grew by 0.5% in the first quarter.

The eurozone economy started the year with robust growth that outstripped that of the US and set the stage for a strong 2017, preliminary estimates show.

The improving economy may weaken the euroskeptic parties that have gained ground in several EU states over the past years, many of which have denounced the poor state of their economies and called for ditching the euro and returning to national currencies, Reuters reported.

GDP of the 19-country eurozone bloc grew by 0.5% in the first quarter, which translates to annualized growth of 1.8% in all of 2017, the European statistics agency Eurostat said.

The preliminary eurozone figure is much higher than the 0.7% annualized growth recorded in the US in the same quarter, the weakest performance since the first quarter of 2014, according to US estimates.

The weaker performance of the US economy was a blow for the administration of President Donald Trump, who has promised strong growth with a protectionist agenda. The contrasting data from the US and the eurozone may weaken the French presidential candidate Marine Le Pen, who is calling for tariff barriers to protect the French economy. She faces free-trade supporter Emmanuel Macron in a May 7 runoff, which polls show Macron is likely to win.

In a further sign of a healthier recovery of the eurozone, Eurostat raised to 0.5% from 0.4% its figures on growth in the fourth quarter of 2016. The year-on-year estimate for the last quarter was also revised up, to 1.8% from the previous 1.7%.

Political risks, however, still represent a possible drag on eurozone growth. “The economy is proving to be resilient to uncertainty both abroad and at home. Bar a surprise at the French elections on Sunday, eurozone growth is set for a strong 2017,” warned Bert Colijn, a senior economist at ING.

Eurostat did not break down the components of the GDP growth, but economists expected it was led mostly by domestic consumption and business investment. Weaker domestic demand might reduce the pace of the expansion in the coming quarters as consumer prices rise. “There remains the possibility that growth could be hampered by consumers being more reluctant to spend as their purchasing power is squeezed by overall higher inflation and limited wage growth in most countries,” Howard Archer, the chief European economist at IHS Markit said.

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