Europe's economy stagnates during 2024 end as Germany's struggles persist

Europe's economy stagnated at the end of last year as former growth engine Germany floundered to the end of a second straight year of shrinking output, officials said Thursday.

Gross domestic product was flat with a zero increase in the final quarter of 2024 in the 20-nation eurozone, EU statistics agency Eurostat said. 

 

The economy slowed from 0.4 per cent growth in the third quarter as businesses were unsettled by possible trade disruptions under the new administration of US President Donald Trump and as consumers remained cautious with spending after being stung by inflation.

Germany, labouring under multiple headwinds including the loss of cheap energy from Russia, choking bureaucracy and political paralysis in Berlin, shrank by 0.2 per cent in the fourth quarter.

The German economy, Europe's largest, also shrank for all of 2024 by 0.2 per cent, the second straight year of declining output. And the outlook for this year isn't much better. The government slashed its 2025 forecast on Wednesday to 0.3 per cent from 1.1 per cent.

Leading economies Germany and France are both unsettled by political turmoil that has left businesses and consumers uncertain about what the future holds in terms of government spending, regulation and taxes. Germany's confusion could clear up after a national election on Feb. 23 following the collapse of Social Democratic Chancellor Olaf Scholz' governing coalition that had been mired in months of bickering over what to do about the economy.

It may take longer for France to emerge from paralysis, since the parliament is deeply divided and a new election can't be held until July at the earliest. Political forces are at odds over how to address the country's large budget deficit.

Business prospects have been unsettled by the election of Trump, an advocate of new and higher import tariffs that could hurt Europe's export-oriented economy. Slowing uptake of electric vehicles and the cancellation by Germany of purchase subsidies for EVs has meant less demand for parts suppliers. On top of that, consumers remain wary about spending even though inflation has come down from its double-digit peak in late 2022.