The European economy will emerge better compared to the expected trade war with the United States and increased progress. The euro zone is expected to grow this year by 1.3% and 1.2%, four and three-tenths better than last spring’s forecast, according to the European Commission’s own forecasts. It also improves the forecast for the European Union as a whole, which stands at 1.4% for 2025 and 2026. This practice had a good first quarter, driven by increased exports to avoid the agricultural war that began in the spring; Labor market resistance supporting consumption and investments driven by the recovery fund explains the figures presented by the European Executive this year.
No country or several countries explain the capital’s best economic forecasts made by the committee. The vast majority of Brazilian states have remained for sale for an extended period since the fall review. Solo Estonia, Luxembourg and Austria see how their expectations have been lowered. Rather, the increase reaches Germany, the great European economy, mired in a structural crisis that has practically crippled it since the first Russian soldiers officially invaded Ukraine in February 2022. It is not a large increase, only from tenths this year (from 0% to 0.2%) and the next (from 1.1% to 1.2%), but its share is the general improvement.
This also reaches Spain, which will become the fastest growing EU economy. Brussels expects growth to reach 2.9% for this year, although the Spanish government is limited in the macroeconomic framework to be presented this week, according to this month’s newspaper El Pais. Activity will calm somewhat next year: growth will reach 2.3%. Six tenths lower but this would practically double the outlook for the entire monetary area.
Labor market resistance, both in Europe and Spain, was a key factor in the economy gaining momentum. Much more, undoubtedly, in the Spanish case, where the arrival of immigrants has become a crucial element explaining the growth in employment, although the rate this year will still be above 10%, and domestic consumption. For this reason, the Commission, when explaining the risks that Spain could face in the future, notes that “a more pronounced slowdown in expected migration flows could reduce the dynamism of the labor market, which would lead to less positive prospects for private consumption and investment.”
For the Union as a whole, the Commission notes that the agreement reached in the summer between Washington and Brussels casts greater certainty on trade than happened half a year ago, when the spring forecast was made (the European Executive Committee is preparing two years in advance). The document issued by the General Directorate of Economics and Finance explained that the overall progress of 15% for exports sold from Europe to the other side of the Atlantic is “the highest level in some cases.” But he also politely notes in this text that this tariff is lower than those imposed by other US trading partners, “giving an advantage over the European economy.” “However, this advantage is characterized by appreciable moderate growth in exports and a stronger euro,” he explains to put this advantage into context and limit it.
What has helped the European economy’s anemic behavior in recent years has been nothing worse than labor market resistance. Discontinuation rates – in the EU and Eurozone – will continue to move towards 6%. This is an average percentage, including things like those in Spain, where the rate will fall to 10% in 2026 for the first time in about 15 years, and those in Germany, where they can reach full employment at a rate of 3.5% despite the economic recession.
It goes so far back that if nothing changes, inflation skyrockets. Prices change at about 2% and this perspective is set until 2027. This is good news from the European Central Bank, which can be considered a target set by the authority, and thus the stability of monetary policy can be concluded. This benefits the granting of loans on favorable terms and benefits corporate investment.
On the public sector side, he highlights the Recovery Fund and other EU financial resources that “buffer the impact of fiscal consolidation in many Member States.” “This support supports domestic demand, which is expected to be the main driver of growth over the expected horizon,” Brusselas explains.
But controlling financial conditions passes through neighborhoods… or across countries. In the European Union, there are those who are working to reduce their heavy burdens, such as Portugal, which will reduce them to about 90% in the three years starting from 2025 to 2027, or Spain, which will reach 97% within two years. Trading volumes are still very large, but they are achieving significant gains compared to the numbers of just five years ago, around 120%.
The Iberian countries’ losses – far more than Portugal’s than Spain’s – would improve the deficit target of 3%, which meets the Stability and Growth Pact. It will conclude its efforts in a better position than the entire European Union or the Eurozone, having outdone itself by the strength of this totemic proportion in the Union since the signing of the Maastricht Treaty in 1992. In this case, much of its part will consider an increase in defense assumptions that, according to figures run by the Commission, will rise from spending of 1.5% in 2024 to 2% of GDP in 2027.
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