Europe's economy grew on an annual basis for the first time in two years, as a recovery picked up pace slightly in the last three months of 2013.

Eurozone GDP rose by 0.3% in the fourth quarter, compared with the third quarter, and by 0.5% over the same period of 2012, according to figures released Friday by Eurostat, reports CNN.

The acceleration was driven by a return to growth in France and Italy, which saw its first quarterly expansion in two and a-half years, and a stronger performance in key economies such as Germany, the Netherlands and Spain.

France managed growth of 0.3% over the quarter, slightly stronger than expected, after zero growth in the third quarter.

Germany, the eurozone's biggest and strongest economy, reported growth of 0.4% quarter-on-quarter, coming in slightly ahead of expectations thanks to robust exports.

The eurozone is still not out of the woods. Inflation is slowing, raising the risk of a slide into deflation, and the economy is still not generating jobs fast enough to bring down unemployment.

Consumer price inflation is less than half the European Central Bank's target. The bank said earlier this month it was ready to take decisive action if necessary to stimulate activity.