Frankfurt, Germany — Freight containers rise against the backdrop of the city’s banking skyline, reflecting the ongoing complexities of global trade. With heightened tensions stemming from U.S. tariffs, the eurozone economy has shown unexpected resilience, recording a growth of 0.4% in the first quarter, according to preliminary data from Eurostat released Wednesday. Economists had anticipated a more modest increase of 0.2%, following a similarly adjusted growth figure from the previous quarter.
Germany, the largest economy in Europe, experienced a GDP uptick of 0.2%, while France’s economy grew by 0.1% during the same period. Notably, smaller Mediterranean economies such as Spain and Lithuania outperformed their larger counterparts, each posting a 0.6% increase. Italy’s economic output rose by 0.3%, while Ireland’s growth surged to 3.2%, attributed to the volatility associated with its numerous multinational firms.
Franziska Palmas, a senior economist at Capital Economics, remarked that the first quarter’s strong growth indicates a healthier start to 2025 than many activity surveys had suggested. However, she cautioned that the impact of U.S. tariffs, implemented in April, is expected to bring about a significant slowdown in growth in the coming months. Palmas predicted that any economic stimulus from Germany’s anticipated fiscal measures would likely manifest more clearly next year.
In the currency markets, the euro saw minor fluctuations, trading 0.08% lower against the U.S. dollar and gaining 0.2% against the British pound shortly after the GDP announcement. Germany’s 10-year bond yield, a benchmark for the eurozone, decreased by three basis points, reflecting investor sentiment amid economic uncertainty.
Despite the recent growth, the eurozone’s economic performance has been lackluster for much of 2023 and 2024, as the European Central Bank (ECB) strives to stimulate activity through interest rate cuts. Earlier this month, the ECB lowered its deposit facility rate to 2.25%, down from peaks of 4% in mid-2023. In March, the bank projected a 0.9% growth for the eurozone in 2025, a slight reduction from earlier estimates, with new projections expected later in June.
During the recent International Monetary Fund and World Bank Spring meetings, many policymakers highlighted U.S. tariff policies as a major concern for global economic growth. ECB President Christine Lagarde noted that while progress is being made in reducing inflation, external shocks could dampen recovery efforts.
Currently, the European Union faces a 20% blanket trade tariff enforced by the U.S., although some of these measures have been temporarily relaxed pending negotiations. The bloc has also deferred retaliatory actions while grappling with additional tariffs on goods such as steel, aluminum, and automobiles.
Economic sentiment within the eurozone has taken a downturn, with recent data revealing a drop in confidence to its lowest level since December 2024. While growth remains fragile, inflation in the region has approached the ECB’s target, registering at 2.2% in March. Fresh inflation figures are slated for release later this week, as the eurozone continues to navigate the turbulence of a shifting global trade landscape.