FRANKFURT, Germany (AP) — Europe’s economy has emerged from stagnation but is on track for only modest growth in coming months as consumers regain some of the purchasing power lost to inflation, the executive said European Union Commission Friday.
The bloc’s economy remains at risk from protectionist moves by key trading partners, the report said. Newly elected US President Donald Trump has often talked about imposing new tariffs, or import taxes, on foreign goods.
“A possible protectionist turn in US trade policy would be extremely damaging for both economies,” said European Economic Commissioner Paolo Gentiloni. The EU “will work with the new government with a strong spirit of cooperation” but also with a willingness to defend open trade. he added.
The 20 countries that use the euro are expected to see growth of 0.8% this year and 1.3% next year, the commission report said.
“After the stagnation in ’23, the European economy is growing again and will accelerate over the next two years, but growth remains modest and exposed to important downside risks,” Gentiloni said.
Growth began to recover earlier this year as new wage deals began to partially restore household finances. The committee said that “consumption restraint appears to be easing.”
It added: “As the purchasing power of wages gradually recovers and interest rates fall, consumption will continue to grow.”
Inflation is expected to reach 2.1% next year, just above the European Central Bank’s target of 2% and a significant relief from the peak of 10.6% recorded in October 2022.
Germany, the eurozone’s largest economy, will see output contraction of minus 0.1% percent for the second consecutive year this year, with a moderate recovery next year of 0.7%.
