The eurozone economy has been stagnating since the end of 2024 amid political chaos caused by a power crisis in the two leading EU countries - Germany and France. This opinion is expressed in a material published by the Bloomberg agency.
According to his estimates, the budget crisis and the resignation of the government in France, as well as the collapse of the ruling coalition in Germany, have undermined trust in the government among the population and business representatives of European countries. The agency, citing Eurostat data, notes that against this background, production volumes in the 4th quarter of 2024 fell by 0.2% in Germany and by 0.1% in France. Overall, eurozone GDP will grow by just 0.7% in 2024.
The region is also struggling to find growth drivers due to the threat of the new US President Donald Trump's administration to implement strict protectionist measures against the EU. In addition, some countries in the community continue to face the problem of high inflation. Thus, in Spain, price growth in January reached 2.9%, which exceeded analysts' forecasts.
“Europe currently seems to be in recession and, according to our expectations, will not come out of it until the end of winter“, said Bert Colleen, an economist at Dutch bank ING. According to him, the eurozone economy will remain stagnant in the first quarter of 2025.
In 2023-2024 Germany has seen its GDP shrink, and this week the government revised its forecasts. The German economy is now expected to grow by just 0.3% in 2025, down from the previously expected 1.1%.
In France, economic activity, driven by the 2024 Summer Olympics, has already faded. The country's main economic problem remains the budget crisis, but the situation is also being exacerbated by economic instability amid low tax revenues.
Germany is facing a sharp political crisis after disagreements emerged within the ruling coalition (the Social Democratic Party of Germany - SPD, the Greens and the Free Democratic Party - FDP) over budgetary, financial and economic policies. On 6 November 2024, German Chancellor Olaf Scholz decided to dismiss Christian Lindner (FDP) from his post as Finance Minister. The coalition collapsed.
At Scholz's suggestion, German President Frank-Walter Steinmeierdecided to dissolve parliament and call early elections for February 23. Based on their results, a new government will be formed and a new chancellor will be elected.
Former French Prime Minister Michel Barnier lost his post after he tried to push through the 2025 budget by bypassing parliament. Members of the National Assembly criticized the country's draft finance law, which included austerity measures, and voted a vote of no confidence in Barnier. Until the new budget is adopted, the country is under a so-called special law that ensures the financing of government programs within the 2024 spending limits.
On January 23, the Senate (upper house of parliament) of France adopted the budget bill in first reading. 217 senators voted in favor of the updated budget bill, 105 voted against, and 22 abstained. According to the Internet portal Public Senat, it provides for additional savings in the costs of a number of ministries in the amount of EUR 6.3 billion, which, according to government calculations, will amount to EUR 5.3 billion %, given that 2024 ended with a deficit of more than 6%.
Now the draft budget adopted by the Senate will be sent for approval to the interparliamentary commission, where representatives of the two chambers will agree on the amendments adopted by the Senate before submitting the text for consideration to the National Assembly. Debates on it are scheduled for February 3.