As the global economic recovery is gathering speed, the one region that is surprising all economists is Europe. Europe, the area that only two years ago most economists had written off, grew at a rate of 2.5% in 2017, the highest pace since 2007 and many economists expect this momentum to continue into 2018.

Europe’s growth has been pushed to new highs (the region is now growing faster than the US) thanks to a strong performance in all areas, but notably France where President Emmanuel Macron has taken his first steps to cut red tape and taxes. A recovery in business optimism within the region helped push growth to 1.9% for 2017, its most substantial rate of expansion since 2011.

The promise of reforms and reduction of red tape have helped contribute to the recovery but so has rising global demand for goods and services. Europe is highly reliant on the rest of the world for exports, with the share of exports in the Euro area of GDP being twice as significant as in the US, and high volatility EM countries account for an increasing share of that. The region has benefitted from a Goldilocks scenario across the rest of the global economy as low oil prices, interest rates and high business optimism have lifted the part on a rising tide.

But does this now mean that the region is more susceptible than the rest of the world to a sudden economic shock such as a sharp rise in oil prices?

According to analysts at Bank of America Merrill Lynch, unlike the US when it comes to insulation from global shocks, Europe is better protected than the world’s largest economies. The analysts point to the austerity drive that crippled Europe’s economy between 2010 and 2013, which triggered a double-dip recession but helped improve the aggregate fiscal position of the region. Correctly, the analysts note that the “cyclically-adjusted deficit – the part of the fiscal balance that is not attributable to the gyrations in the business cycle – is now very low, at less than 1% of potential GDP in 2017, in sharp contrast with the US [2.7%], and the overall deficit stands at only 1.1% of GDP.”