Germany and Italy — the bloc’s two big manufacturing economies — performed less well, with GDP contracting by 0.1 percent quarter-on-quarter. Franziska Palmas, senior Europe economist at Capital Economics, said that this leaves the long-suffering German economy at its pre-pandemic size.
“Germany is likely to be hit harder than other major economies by tariffs and continue to struggle this year before fiscal stimulus starts to boost the economy in 2026,” she said.
Spain continues to outperform, growing by 0.7 percent, making it the fastest-growing economy across the entire European Union. Year-on-year, Spanish GDP expanded by 2.8 percent.
The currency area’s economic performance, while hardly stellar, is solid enough to likely dissuade the European Central Bank’s Governing Council from lowering its key policy interest rate in September.
However, it remains to be seen how the eurozone reacts to the 15 percent tariffs enacted by its biggest trade partner, the U.S., as part of the trade deal struck by Trump and European Commission President Ursula von der Leyen in Scotland.
Claus Vistesen, chief eurozone economist at economic research firm Pantheon Macro, said he was downbeat about the outlook for the eurozone economy in the second half of the year.
