Eurozone loses momentum: growth projected below 1 percent

Brussels – Eurozone growth is losing momentum. Compounded by “an uncertain and unclear environment,” marked by risks deriving from “tariffs and security,” the outlook points to slightly lower-than-expected expansion, Eurogroup President Paschal Donohoe admitted at the end of the work of the euro area economic ministers. There is nothing new here. The European Commission already said that the eurozone’s economic performance is unlikely to meet expectations, but now the scenario is becoming real. According to Pierre Gramegna, director general of the European Stability Mechanism (ESM), “Markets are expecting growth of Europe to be slightly lower than predicted, probably slightly below 1 percent.”

The eurozone is, therefore, likely to see ‘zero-point’ growth in 2025—indeed, not good news, but one that can serve to close ranks and do homework. Brussels urges member states not to delay with reforms. “Economic growth depends on us,” Donohoe stresses. If the president of the Eurogroup also links this warning to the issue regarding defense investment, the Economy Commissioner, Valdis Dombrovskis, presses the brakes: “We are proposing flexibility for defense spending not because of the prospects of contraction, but for security reasons.”

Indeed, the Economy Commissioner admits that “strengthening the European defense industry” is one of the goals of the European policy agenda, and this could benefit eurozone economies and the euro area as a whole. It is a way of saying that the loosening of internal stability pact rules that the EU executive proposed could also help produce a new kind of growth that could offset the losses in traditional sectors. Of course, it is impossible to dispel all risks on the horizon: Dombrovskis admits that a trade war is possible when he reiterates that “the EU will react promptly and decisively to US tariffs” should the Trump administration confirm its intentions.