Modest Growth in Euro Area

On average, the institutes anticipate that Euro area growth will remain modest, reaching 1.1 percent in 2025 and 1.0 percent in 2026. These expectations are slightly more cautious than those in the European Commission's Autumn 2025 Economic Forecast (1.3 and 1.2 percent) and the IMF's Autumn 2025 World Economic Outlook (1.2 and 1.0 percent). The core economies are no longer the primary drivers of European growth. Instead, countries such as Spain, Ireland, Croatia, Denmark, Norway, and Greece are outperforming, while Germany, Italy, Austria, and France continue to trail behind.

Inflation is projected to moderate to 2.1 percent in 2025 and 1.8 percent in 2026, though external shocks remain the dominant risk. Labour markets are cooling, with persistent divergence across countries: Spain maintains double-digit unemployment, Germany faces industrial headwinds, and several Nordic countries report shortages of skilled labour.