The eurozone posted GDP growth of 0.3% in Q4, against 0.2% growth in the previous quarter and 0.9% over 2014 as a whole.
The German economy grew by 0.7% over the quarter, far surpassing estimates of around 0.3%, after contracting 0.1% in Q3.
The figures mean the UK is no longer the fastest growing European country, recording 0.5% growth in the final three months of last year.
Improving sentiment helped life European markets to record levels, with the German DAX hitting an all-time high of over 11,000 on Friday and the Stoxx Europe 600 reaching a seven-year high in early trading.
A ceasefire agreement in Ukraine and a revival of Greek bailout negotiations have also helped drive markets higher.
However, the story was not universally positive, with three countries, Finland, Cyprus and Greece, seeing their economies contract in Q4.
France and Italy also posted disappointing GDP growth. The French economy grew by just 0.1% over the same period while the Italian economy stagnated.
While growth in Europe is speeding up, it is still significantly behind the US economy which grew by 2.6% in the fourth quarter, according to the Bureau of Economic Analysis’ advance estimate.
Ben Brettell, a senior economist at Hargreaves Lansdown, said: “This is the latest in a series of signs that the economic climate might be improving, and the European Central Bank’s quantitative easing programme might therefore benefit from a following wind.
“Most notably, the credit cycle appears finally to be showing improvement – after two-and-a-half years of contraction, eurozone bank lending to the private sector is growing again.”
