Despite the trade turbulence caused by the US global tariffs, the European economy will continue growing at a moderate pace in 2025 and 2026above what was expected, according to the autumn economic forecasts that the European Commission has been made public this Monday.
The EU’s GDP will grow by 1.4% in 2015, which represents a slight improvement in projections compared to spring, when the Commission limited growth for this year to 1.1%. For next year, however, there is a small downward correction. Brussels estimates that the bloc’s GDP will maintain growth at 1.4% in 2026, compared to the 1.5% it projected last May.
The panorama is similar for the euro zone. Brussels revises growth forecasts for this year upwards from 0.9% to 1.3%, and slightly lowers the GDP increase projection for 2026 from 1.4% to 1.2%. Brussels recognizes that there was an initial rebound as a consequence of increase in exportsin anticipation of the impact that US tariffs could have. But also that the European economy continued to grow after “expanding at a moderate rate” despite “a complex external environment.”
Uncertainty
Brussels warned that an open trade war with the United States could be devastating for the European economy. The agreement reached in July between Commission President Ursula von der Leyen and President Donald Trump minimized the impact, but does not rule it out. Neither does the iuncertainty about possible new measureswhich Brussels, at the moment, does not have.
“The trade agreements reached between the US and its trading partners, including the EU, have mitigated some of the uncertainties that overshadowed the spring forecasts,” the Commission report underlines. But at the same time, it recognizes that trade barriers have reached historic highs with Trump in the White House.
Brussels highlights that the tariffs faced by European products are largely inferior to those who suffer in other countries. “This represents a modest relative advantage for the EU economy,” argues the Commission. However, This could change since the White House is studying potential exceptions to certain products.
Growth engines
The European Commission recognizes that “the global environment remains challenging”but trusts in the resilience of the community labor market, the increase in purchasing power and financing conditions favorable to support “moderate economic growth.” Once again, the recovery plan is being key to relaunching the economy, in a context in which More and more countries are heading towards fiscal consolidation.
Brussels recognizes that European funds are what are allowing domestic demand to be supported, cushioning the impact of cuts in public spending. It is this demand that “is emerging as the main driver of growth” according to the commission. The community executive It also expects an increase in private investment. Also see the Defense spending as a potential engine of growth.
Employment and Inflation
Regarding the rest of the indicators, inflation in the euro zone is 2.4% and the Commission expects it to reach the 2% objective set by the European Central Bank in 2027. Brussels points to a drop in the price of services and foodwhich is offset by the increase in energy inflation.
Brussels also hopes that jobs continue to be generated in the block. In particular, the Commission aims for an increase in the employment rate of 0.5% in 2025 and 2026 and for unemployment to fall from 5.9% this year and next to 5.8% in 2027. “It is expected that EU wage growth slowsbut remains above inflation, slightly improving the purchasing power of households,” says the Commission.
Despite the widespread fiscal consolidation of which the Executive speaks, Brussels foresees that both the general public deficit in the EU and the debt will increase in the next three years. By 2027, the deficit will be around 3.4%, and the debt, in ranges above 100% for many countries, above what the fiscal rules establish. However, the Commission largely attributes the rebound to the expected increase in defense spendingfor which governments can make use of the escape clause from the rules.
The Executive recognizes in any case that uncertainty persists. That trade restrictions will continue weighing down the European economy and an escalation of geopolitical tensions could have an even greater impact. Also that internal political uncertainty in the bloc could affect investment. Still, Brussels estimates that the risks to growth prospects “lean to the downside.”
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