By Paul Hannon, William Horobin and Jeannette Neumann
Growth in the euro currency zone gathered pace in the first three months of the year, bringing economic output back to its level just before the 2008 financial crisis -- a belated achievement that reflects the region's arduous path to recovery.
The strong first-quarter performance supported a drop in unemployment, but didn't dispel doubts about sluggish overall growth in recent times that has left the eurozone grappling with chronically weak inflation, still-high joblessness, and elevated debt.
The eurozone's continuing struggle for full recovery makes other major economies' recent records look sprightly -- the U.S. regained its pre-crisis economic output level in 2011 -- and has fueled a debate about whether Europe is following the right mix of policies.
The European Central Bank, under fire in Germany for trying too hard to stimulate growth via money-printing, has in turn accused governments of investing too little and not reforming sclerotic markets enough.
The eurozone's gross domestic product grew at an annualized pace of 2.2% in the first quarter, data published by the European Union's statistics unit showed. That was about twice as fast in the previous quarter.
The solid first quarter, at a time when financial markets were volatile and European exports to China and other large economies weakened, was a welcome sign of resilience, and contrasts with a slowdown in the U.S.
However, economists expect growth to moderate in coming quarters, with many forecasting that the economy's rate of expansion this year will remain close to the 1.6% recorded in 2015.
Across the developed world, concerns are mounting that economies have become overly reliant on easy-money policies. In Washington this month, top financial officials and central bankers warned that monetary policy alone cannot lead to balanced growth, and pledged to implement growth-boosting economic and budgetary reforms.
The calls for government action have grown louder as central banks reach deeper into their toolboxes, and each round of stimulus appears less effective than the last.
ECB President Mario Draghi has repeatedly urged governments to support his stimulus measures by pressing ahead with long-promised economic overhauls, and boosting public investment in fiscally robust countries such as Germany.
But in many countries, such as France, governments face daunting political hurdles to market-oriented overhauls, which many European officials view as both economically overdue and politically suicidal.
A lack of dynamism and demand has contributed to sagging inflation, which for the past three years has been below the ECB's target of just below 2%. Eurozone inflation in the year to April was -0.2%, data published on Friday showed.
The ECB has launched a series of stimulus measures since mid-2014, the most recent package in March. So far, they have had little success in raising the inflation rate, although policy makers say the eurozone would have entered a deflationary spiral had they not acted.
"With rare exceptions our monetary policy has been the only policy in the last four years to support growth," Mr. Draghi said at a news conference last week. "As I've said many, many times, not only monetary policy is a necessary condition for returning to structural, long-term, sustainable growth."
But the ECB's calls have yet to generate an energetic response.
Ángel Gurria, secretary-general of the Organization for Economic Cooperation and Development, in an interview Wednesday echoed Mr. Draghi's pleas. But he said enthusiasm for such reforms appears to be "ebbing, just at a time when we need it to be really roaring."
The U.S. administration would also like to see eurozone governments do more to aid the recovery, as outlined Friday in a blog posting co-written by Jason Furman, chairman of the Council of Economic Advisers.
"With interest rates in Europe testing negative territory even in nominal terms, there is an opportunity to expand infrastructure spending, either at the sub-national, national, or EU level," he wrote.
Mr. Gurria listed a variety of possibilities for growth-friendly reforms, including reducing taxes on workers and businesses, more flexible labor laws and greater spending on research and development.
The difficulties facing governments in following through on that advice is evident in France. Figures released Friday showed French economic growth firmed up at the start of the year, prompting Finance Minister Michel Sapin to say his government will pursue its current course "with determination" in the coming months.
Yet the latest attempts to boost job creation by loosening labor laws have sparked widespread protests, some of which turned violent Thursday, injuring 24 police officers, three seriously. Since the protests against the labor overhauls began, 382 people have been arrested, 124 on Thursday alone.
In the face of the protests, French President François Hollande has backed off from bigger changes to labor laws that would have clarified conditions for laying off workers, capped court-ordered severance awards and given businesses greater latitude to negotiate with employees.
His government has presented a modified labor bill that infuriated business leaders who say the changes will do more to discourage than encourage job creation.
Gilles Penet, who runs OPS, a Burgundy-based furniture maker, says business leaders like him have already lost their appetite for taking risks because of the retreat over labor laws. With only a year to go to presidential elections he expects the distrust to persist.
"Nothing more will happen this year," Mr. Penet said.
Unemployment figures also released Friday by Eurostat showed the jobless rate across the eurozone fell to 10.2% in March from 10.4% in February as the number of people without work dropped by 226,000. That was only the third monthly decline in excess of 200,000 during the last decade, but still left 16.4 million looking for jobs.
But while the prospect of a 2017 election may be holding back overhauls in France, uncertainty about the composition of a new government didn't hinder Spain's recovery during the first three months of the year.
Spaniards are set to vote again in June after no single party won an outright majority in December elections. Most polls suggest that the outcome of a new round of voting wouldn't be much different than the last one, leaving many voters unclear about how parties will cobble together a government -- and what their tax and other economic policies might be.
Figures released Friday showed the economy grew at an unchanged rate of 0.8% during the first quarter, but businesses still fear that political uncertainty could yet crimp spending by households.
Alfonso Jiménez says domestic demand for the packaged meats his company Cascajares packages and sells has weakened, and attributes that to the country's political landscape.
"When people don't have money or when they don't have confidence, they stop buying," Mr. Jiménez said. "People are still buying but we're certainly calling for a political agreement so that we can start to grow again."
--Tom Fairless in Frankfurt and Jason Douglas in London contributed to this article.
Write to Paul Hannon at firstname.lastname@example.org, William Horobin at William.Horobin@wsj.com and Jeannette Neumann at email@example.com