By Simon Nixon

There is a strange disconnect in Europe at the moment. The eurozone economy is growing at an annualized rate of more than 2%, its fastest in more than six years and faster even than the U.S. Every country in the eurozone is growing, and the growth is across all sectors. The latest surveys show sharp increases in manufacturing-and-services activity, order books and business optimism, with French output stronger than German for the first time since 2012. Meanwhile, job creation is running at its strongest in almost a decade and unemployment has been falling rapidly across the bloc to 9.6%, down a full percentage point in a year and the lowest since 2009.

Yet this positive economic news stands in marked contrast to the deep malaise among Europe’s political class, perhaps deeper than at the height of the eurozone debt crisis. Politicians and policy makers are suffering from a crisis of confidence in their ability to take effective action, both at a domestic and European level, in the face of rising populism and nationalism. At the same time, there is acute anxiety about the external pressures on Europe, not least from a Trump administration that has often appeared hostile to the European Union. Many fear that the forces pulling Europe apart are stronger than those binding it together and that politicians are increasingly powerless to halt the process.

Perhaps the businesses and households driving this growth know something that has eluded nervous politicians and policy makers. After all, the return of broad-based growth has removed what until very recently seemed to be one of the biggest risks facing the eurozone: a slide into a deflationary debt trap with the European Central Bank out of ammunition. For much of the last quarter of 2016, there was an anguished debate about whether the ECB had sufficient firepower to return inflation to its target of close to but below 2%. When the ECB reduced the monthly size of its bond purchases in December and failed significantly to expand the universe of bonds it could buy, it was widely seen as a defeat for Frankfurt at the hands of Berlin, leaving the eurozone vulnerable to future shocks.

Yet now the debate is all about how quickly the ECB will taper its bond-buying program and when it will start raising rates. The market’s new anxiety is the impact the end of quantitative easing might have on the borrowing costs of some southern European countries, including Italy and Portugal. Yet fears of a new debt crisis seem at best premature. Core inflation remains well below the ECB’s target even if headline inflation has picked up, largely in response to higher energy prices. The ECB is committed to continuing to buy bonds until at least the end of 2017, and even then would only start to taper its purchases if the eurozone recovery was very robust. That suggests government borrowing costs are likely to continue to be held down, allowing governments to continue to refinance debt at very low interest rates.

As for the political risks that have dominated discussion of the eurozone this year, these remain very real—but they are also low-probability tail risks. Indeed, one of the most immediate concerns receded this week following a meeting in Brussels on Monday that appeared to end a monthslong three-way standoff between Athens, Berlin and the International Monetary Fund over the next stage of Greece’s bailout program. One top official now says he is confident a deal can be reached before Greece runs into renewed financing pressures, something he didn’t believe a week ago. At the same time, polls still suggest a populist or far-right victory in either the Dutch or French elections remains unlikely, while a growing split in Italy’s ruling Democratic Party makes an election this year increasingly unlikely, even as it makes the outcome less certain.

Political risks, moreover, can work both ways. One major reason why the eurozone has proved so incapable of taking decisive action may be that its leaders have been thinking about this year’s elections for at least two years. As they loomed, political leaders couldn’t afford to be seen contemplating new ways to work collectively to address common problems, one top policy maker says. At the same time, political stability offers the best hope for the kind of ambitious structural reforms required in many eurozone countries. The start of a new political cycle after this year’s elections, combined with changes in leadership, may yet lead to more effective decision-making.

What of the external political risks to the eurozone, notably from the U.S.? So far, the jury is out on what the arrival of the Trump administration will mean for Europe, despite deep nervousness across the continent. In economic terms, there are aspects of the Trump agenda that could be positive for Europe, particularly if lower taxes and deregulation boosts global growth. Trump administration pressure on EU governments to boost military spending could also lead to extra fiscal stimulus. Far less welcome would be any sign that the U.S. was intent on pursuing protectionist policies or if its moves to deregulate finance extended to weakening bank capital rules, risking a damaging rift in the global financial system. But until now, there has been a lot of noise but little action. Businesses may be right to bet it will stay this way.