Something extraordinary is happening to the European economy: Southern nations that nearly broke up the euro currency bloc during the financial crisis in 2012 are growing faster than Germany and other big countries that have long served as the region’s growth engines.

The dynamic is bolstering the economic health of the region and keeping the eurozone from slipping too far. In a reversal of fortunes, the laggards have become leaders. Greece, Spain and Portugal grew in 2023 more than twice as fast as the eurozone average. Italy was not far behind.

Just more than a decade ago, Southern Europe was the center of a eurozone debt crisis that threatened to pull apart the bloc of countries that use the euro. It has taken years to recover from deep national recessions and multibillion-dollar international bailouts with tough austerity programs. Since then, the same countries have worked to mend their finances, attracting investors, reviving growth and exports, and reversing record-high unemployment.

Now Germany, Europe’s largest economy, is dragging down the region’s fortunes. It has been struggling to pull itself out of a slump set off by soaring energy prices after Russia’s invasion of Ukraine.

That was clear Tuesday, when data showed that economic output of the euro currency bloc grew 0.3% in the first quarter from the previous quarter, according to the European Union’s statistics agency, Eurostat. The eurozone economy shrank by 0.1% in both the third and fourth quarters of last year, a technical recession.

Germany, which accounts for one-quarter of the bloc’s economy, barely avoided a recession in the first quarter of 2024, growing 0.2%. Spain and Portugal expanded more than three times that pace, showing that Europe’s economy continues to grow at two speeds.

After years of international bailouts and harsh austerity programs, southern European countries made crucial changes that have attracted investors, revived growth and exports and reversed record-high unemployment.

Governments cut red tape and corporate taxes to stimulate business and pushed through changes to their once-rigid labor markets, including making it easier for employers to hire and fire workers and reducing the widespread use of temporary contracts. They moved to reduce sky-high debts and deficits, luring international pension and investment funds to start buying their sovereign debt again.

“These countries very much got their act together in the wake of the European crisis and are structurally more sound and more dynamic than they were before,” said Holger Schmieding, chief economist at Berenberg Bank in London.

Greece’s economy grew about twice the eurozone average last year, buoyed by rising investment from multinational companies such as Microsoft and Pfizer, record tourism and investments in renewable energy.

In Portugal, where growth has been driven by construction and hospitality, the economy expanded 1.4% in the first quarter when measured against the same quarter last year. The rate for Spain’s economy over the same period was even stronger, at 2.4%.

In Italy, the conservative government has been restraining spending, and the country is exporting more technology and auto products while drawing in new foreign investment in the industrial sector. The economy there has roughly matched the eurozone’s overall growth rate, a marked improvement for a country long viewed as an economic drag.

For decades, Germany grew steadily, but instead of investing in education, digitization and public infrastructure during those boom years, Germans grew dependent on Russian energy and exports to China.

The result has been two years of near-zero growth, landing the country in last place among its Group of 7 peers and the eurozone countries. When measured year-over-year, the country’s economy shrank 0.2% in the first quarter of 2024.

France’s finances are getting worse: The deficit is at a record high of 5.5% of gross domestic product, and debt has reached 110% of the economy. The government recently announced it would need to find around 20 billion euros in savings this year and next.

The Netherlands only recently exited a mild recession that hit last year, when the economy contracted 1.1%. The Dutch housing market was especially hard hit by tighter monetary policy in Europe.

Together, the German, French, and Dutch economies account for around 45% of the eurozone’s gross domestic product. As long as they are dragging, overall growth will be subdued.