Euro zone GDP growth surpasses expectations in 2025

In the Euro zone, the economy demonstrated a stronger-than-anticipated performance in the first quarter of 2025, with a gross domestic product (GDP) growth of 0.4%. This expansion exceeded economist predictions of 0.2%, providing hope for the economic landscape in the region. Germany, the largest economy in Europe, reported a modest growth of 0.2% during the same period, while France's GDP increased by 0.1%. Southern European economies, such as Spain and Lithuania, outperformed their larger counterparts, each observing a growth of 0.6%, while Italy also saw a positive increase of 0.3%. Ireland's GDP jumped impressively by 3.2%, reflecting the variable influence of multinational companies on its economy. Despite these positive figures, experts remain cautious regarding the sustainability of this growth. Economists, including Franziska Palmas from Capital Economics, have cautioned that while the Euro zone is starting 2025 on a stronger economic note, they predict a slowdown in growth in the coming months, primarily due to the impact of tariffs imposed by the US. These tariffs, introduced in April, are expected to negatively affect economic activity across the Euro zone, while the fiscal stimulus anticipated in Germany is likely to provide more significant effects next year rather than immediately. The recent growth statistics come at a time when the Euro zone has faced sluggish economic performance throughout 2023 and 2024, leading to interest rate cuts by the European Central Bank (ECB) to stimulate activity. In March, the ECB projected an overall economic growth of 0.9% for 2025, a slight adjustment from earlier estimates. As economic conditions fluctuate, the ECB's President Christine Lagarde noted the disinflationary trend is nearing completion, although external factors like tariffs may hinder growth. With Euro zone inflation also nearing the ECB's target of 2%, registering at 2.2% in March, the overall economic sentiment has been affected, hitting its lowest level since December 2024. This indicates a complex and evolving economic environment where growth may be achieved but is still fraught with challenges, calling into question the longevity of the positive outcomes revealed in the GDP data.