Germany and Italy Experience Economic Contraction Amid Trade Concerns
Germany and Italy, two major manufacturing economies in the European Union, reported a 0.1 percent contraction in GDP for the last quarter, marking a significant setback. This decline leaves the German economy at its pre-pandemic size, according to Franziska Palmas, senior Europe economist at Capital Economics, who emphasized that Germany is likely to face greater challenges than other leading economies due to the imposition of tariffs. “Germany is likely to be hit harder than other major economies by tariffs and continue to struggle this year before fiscal stimulus starts to boost the economy in 2026,” she stated, highlighting ongoing economic difficulties.
In contrast, Spain remains a bright spot, having achieved a 0.7 percent growth, making it the fastest-growing economy in the EU. This performance underscores divergent economic trajectories within the bloc.
The overall economic performance of the eurozone, while underwhelming, is expected to influence the European Central Bank’s decision-making regarding key policy interest rates. Indicators suggest the Governing Council is unlikely to decrease rates in September, given the current conditions.
The response of the eurozone to the recent 15 percent tariffs introduced by the United States, as part of a trade agreement between former President Trump and European Commission President Ursula von der Leyen, remains a critical factor. The imposition of these tariffs could exacerbate existing economic pressures within the region, posing questions about future growth and stability.
As the economic landscape continues to shift, the necessity for strategic fiscal measures and long-term planning becomes increasingly apparent. The disparate performance of member states indicates that further challenges lie ahead for the eurozone as it navigates these complex issues.
, reports 24brussels.
