Eurozone’s economy beats forecasts with 0.4% growth in Q1

The Eurozone economy grew by 0.4% in the first quarter of 2025, doubling what most analysts expected. The data came from Eurostat on Wednesday, showing stronger-than-expected output even as the region deals with pressure from U.S. trade tariffs and sluggish consumer confidence.

Most economists, polled by Reuters, had predicted just 0.2% growth for the quarter. That would’ve matched the revised figure from the final quarter of 2024.

But instead, smaller countries in the bloc outpaced the usual powerhouses, dragging up the numbers while bigger economies like Germany and France barely moved.

Southern economies do the heavy lifting

Germany, which leads the Eurozone in size, posted a 0.2% bump in GDP for Q1. The number was released Wednesday by the German federal statistics office and was adjusted for price, season, and calendar differences.

The office said the growth came from a rise in consumer spending and capital formation, meaning households bought more and businesses invested more than they did late last year.

That growth followed a 0.2% drop in Q4 of 2024, meaning Germany managed to avoid a technical recession — defined by two straight quarters of economic decline. But it wasn’t much of a rebound. The country has been stuck in a stop-start loop for over a year. Every three months, it’s either crawling forward or sliding back.

Other sectors in Germany are still struggling. Auto manufacturing is under pressure from competition with China. Housebuilding, infrastructure, and public investment remain weak due to high costs and bureaucratic delays. All this while the country’s most important trading partner, the United States, keeps slapping new tariffs on exports.

As part of the European Union, Germany faces a 20% blanket tariff on goods headed to the U.S. The rate was temporarily lowered to 10% to allow time for negotiations, but that pause expires in July. The country is also hit by specific duties on steel, aluminum, and cars.

And now that Donald Trump is back in the White House, there’s even more tension. Last week, Economy Minister Robert Habeck said Germany now expects no economic growth at all in 2025 and blamed Trump’s tariff policies for the downgrade.

Outside of Germany, the Eurozone’s better numbers came from smaller countries. Spain and Lithuania each posted 0.6% growth. Italy moved up by 0.3%. But Ireland went full beast mode, jumping 3.2% in just three months. That kind of leap isn’t new for Ireland — its economy is stacked with big multinationals, which makes its numbers more volatile than most others in the bloc.

France barely added anything, with 0.1% growth in Q1. It still counts as growth, but it’s clear that the southern and smaller countries carried the bloc this quarter.

Tariffs hit sentiment as ECB tries to stay on course

The European Central Bank has spent most of the past two years cutting rates to keep the Eurozone economy from stalling out completely. Earlier this month, the ECB cut its deposit facility rate — its key policy rate — to 2.25%, down from 4% in mid-2023. The move was meant to spark more borrowing and spending across the region.

Back in March, the ECB said it expected Eurozone GDP to grow by 0.9% in 2025. That was a step down from its January forecast. New projections are coming in June, and the central bank has said these next numbers will be critical in deciding what to do with interest rates next.

But rate cuts aren’t a silver bullet. Christine Lagarde, the ECB president, said the region’s disinflation process is “so much on track that we are nearing completion,” but warned that shocks like tariffs from the U.S. could “dampen” growth again.

At the International Monetary Fund and World Bank Spring Meetings, officials from both the ECB and other global institutions said Trump’s trade policy is one of the biggest threats to growth in Europe.

Right now, the European Union is waiting before launching any retaliatory tariffs of its own. The bloc is holding fire until talks with the U.S. either succeed or collapse in July.

Cryptopolitan Academy: Coming Soon - A New Way to Earn Passive Income with DeFi in 2025. Learn More