22 May
The eurozone economy delivered an unexpected boost at the start of 2025, expanding by 0.4% in the first quarter—twice the forecasted rate. This performance was fueled by strong activity in Spain and early signs of rising investment, supported by EU recovery funds and lower financing costs. Fabio Balboni of HSBC noted, “Private consumption is now finally moving in step with real wage growth,” highlighting a positive shift in household spending trends.
However, a closer look reveals uneven momentum across the bloc. Ireland’s 3.2% surge—driven by multinational corporations—distorted the regional average, while core economies like Germany, France, and Italy posted slower gains of just 0.2%, 0.1%, and 0.3%, respectively. Inflation also eased slightly, with German price growth nearing the European Central Bank’s 2% target. ING’s Carsten Brzeski commented that the latest figures support a cautious path toward interest rate cuts, without signaling any urgency.
Despite this early-year optimism, external pressures loom large. Fresh U.S. tariffs, weakening sentiment, and financial market instability are clouding the outlook. Leading European companies, including Mercedes-Benz and Volkswagen, have warned that trade barriers could squeeze profits and reduce investment. Even before these risks emerged, the region’s growth prospects were already subdued, suggesting limited resilience in the face of escalating global tensions.
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source: Reuters
