Eurozone Resilience: Economy Defies Gloom as Germany Rebounds

Defying bearish expectations, the Eurozone economy grew by 0.3% in the fourth quarter of 2025, offering the European Central Bank (ECB) breathing room as it navigates a complex inflationary landscape.

Germany Wakes Up

The standout performer was Germany, the blocs largest economy, which also recorded 0.3% growth—its strongest quarterly showing in three years. ING economists attribute the rebound to stabilization in the industrial sector.

• Spain: 0.8% growth
• France: 0.2% growth
• Italy: 0.3% growth

The “Trump Trade” Risk

While the domestic data is encouraging, external threats are mounting. ING and Commerzbank analysts warn that the “old era” of open trade with the US may be over. Canadian central bankers have already flagged the end of predictable trade relations.

• Currency Drag: The EUR has appreciated approximately 14% against the USD over the last 12 months, making exports less competitive.

ECB Policy Outlook

The solid growth data supports the ECBs “patient” stance. With inflation stabilizing near the 2% target and growth holding up, the central bank is under less pressure to cut rates aggressively. However, if the US Dollar continues to weaken structurally, a soaring Euro could force the ECB to intervene dovishly.