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Euro Surges, Threatening EU Exports Amidst Global Uncertainty
30 Jan
Summary
- Eurozone economy grew 0.3% in Q4 2025, matching the previous quarter.
- A strengthening euro makes European exports less competitive globally.
- Germany's growth outlook for 2026 was cut to 1% from 1.3%.
The European economy experienced moderate growth of 0.3% in the fourth quarter of 2025, matching the preceding quarter's performance. This expansion occurred despite earlier anxieties surrounding potential U.S. tariffs. Growth for the broader 27-country European Union also registered at 0.3% for the same period.
However, a significant headwind has emerged: the euro's appreciation against the dollar. The euro has risen 14.4% over the past twelve months, reaching $1.19, which diminishes the price competitiveness of European exports in key international markets. Analysts suggest the European Central Bank might consider interest rate cuts if this trend persists.
Germany, the eurozone's largest economy, reported its best quarterly growth in three years at 0.3% but faces persistent challenges. The government has lowered its 2026 growth forecast to 1%, down from 1.3%, citing issues like high energy prices and skilled labor shortages.
