The growth engine Germany is in trouble, and the European economy is facing "zero growth" by the end of 2024
The European economy faces zero growth by the end of 2024, with the German economy shrinking for the second consecutive year. According to a report from the European Union's statistics office, the GDP of the Eurozone remained flat in the last quarter of 2024, with consumer spending cautious due to U.S. trade policies and inflation. The German economy contracted by 0.2% in the fourth quarter, also declining by 0.2% for the entire year. The government has lowered its growth expectations for 2025, and political turmoil has intensified economic uncertainty, especially in Germany and France
According to the Zhitong Finance APP, European officials stated on Thursday that the European economy stagnated at the end of last year, with the economic output of Germany, the former growth engine, shrinking for the second consecutive year. The European Union's statistical agency Eurostat reported that the GDP of the 20 countries in the Eurozone remained flat in the last quarter of 2024, showing zero growth.
The growth rate of the European economy slowed from 0.4% in the third quarter, due to concerns among businesses about potential trade disruptions caused by the new government under U.S. President Donald Trump, while consumers remained cautious about spending despite inflationary pressures.
Under the influence of multiple adverse factors, including the loss of cheap energy from Russia, bureaucracy, and political paralysis in Berlin, the German economy contracted by 0.2% in the fourth quarter.
Germany, the largest economy in Europe, also shrank by 0.2% for the entire year of 2024, marking a second consecutive year of output decline. There are no signs of improvement in this year's outlook. The government on Wednesday revised its growth forecast for 2025 down from 1.1% to 0.3%.
Major economies like Germany and France are troubled by political turmoil, which has left businesses and consumers uncertain about the future of government spending, regulation, and taxation. The ruling coalition led by German Social Democratic Party Chancellor Olaf Scholz has been in heated debate for months over how to address economic issues, and the confusion in Germany may be clarified after the national elections on February 23.
France may take longer to recover from paralysis, as the parliament is severely divided, with new elections not expected until at least July. Political forces are divided on how to address the country's massive budget deficit.
Trump's election has brought instability to the business outlook, as he advocates for higher import tariffs, which could harm Europe's export-oriented economy. The slowdown in the adoption of electric vehicles and Germany's cancellation of electric vehicle purchase subsidies mean reduced demand for component suppliers. Most importantly, despite inflation rates having fallen from double-digit peaks at the end of 2022, consumers remain cautious about spending