European economic growth stagnates, ECB executive: Interest rate cuts cannot solve structural economic problems

According to the Zhitong Finance APP, Isabel Schnabel, a member of the European Central Bank's Executive Board, stated that interest rate cuts by the European Central Bank cannot resolve the structural challenges facing the Eurozone economy. Schnabel made her remarks during a speech at the German Institute for Employment Research, noting that the current economic growth in the Eurozone can only be described as moderate, while trade uncertainties have "sharply" increased, and the assistance provided by easing monetary policy is limited. She stated, "Lowering interest rates can alleviate economic weakness, but cannot solve structural crises, including high energy prices, loss of competitiveness, and labor shortages."

Schnabel believes that Europe needs to readjust its economy, especially in light of the return of U.S. President Trump and his preference for tariffs. She said, "In the face of increasing geopolitical divisions, there is a need to reconsider the export-oriented growth model."

Schnabel's latest comments echo her previous views. At the end of last year, she warned against significantly lowering interest rates to address issues beyond the scope of monetary policy.

European Economy in Trouble, Growth Outlook Not Optimistic

Since June of last year, as inflation rates fell to 2%, the European Central Bank has been lowering interest rates to boost the struggling economy, but the European economy still shows little improvement.

Preliminary data released by Eurostat on January 30 indicated that the Eurozone's economic growth stagnated in the fourth quarter of last year, dragged down by the economic contraction of France and Germany, the two major economies in Europe. Analysts pointed out that although the European Central Bank will continue to ease monetary policy and the European Commission has proposed growth plans amid widespread economic weakness, it is difficult for the European economy to improve in the short term, and the growth outlook remains bleak.

Meanwhile, the European economy also faces the threat of Trump's tariff "club." Trump has complained on multiple occasions about the U.S. trade deficit with Europe and threatened to impose tariffs on EU goods. On February 10, local time, Trump signed an executive order announcing a 25% tariff on all steel and aluminum imported into the United States. Trump also stated that there would be "no exceptions or exemptions" for the related requirements.

The United States is the most important export market for European goods. Trump's tariff policy could exacerbate the already fragile European economy. Brian Coulton, Chief Economist at Fitch Ratings, stated that Trump's tariff policy will undoubtedly have negative impacts, especially against the backdrop of internal growth challenges facing the European economy. He pointed out that one of the most affected European economies could be Germany, primarily because Germany is a very open economy, with exports accounting for a significant portion of its GDP, and the U.S. is one of its important trading partners; even before the tariff adjustments, Germany's exports were already under pressure, particularly in sectors such as the automotive industry, so this impact is undoubtedly negative.

Fitch Ratings has downgraded its growth forecast for the Eurozone in its latest Global Economic Outlook, partly based on the assumption that EU imported goods may be subject to a 10% tariff. Brian Coulton noted that while the negative impact on Europe is not as significant as that on Mexico and Canada, it still represents a substantial negative shock, especially in light of the weak economic performance within Europe Bert Colijn, chief economist at ING Group, stated that in the short term, the European economy remains sluggish and is not expected to emerge from this predicament this winter; preliminary signs indicate that economic growth in the first quarter of 2025 will still be zero. He anticipates that demand may drive some growth in the European economy within this year.

The European Central Bank expects that economic growth in the Eurozone will only be 1.1% in 2025 and 1.4% in 2026. According to the preliminary forecasts from Eurostat, the Eurozone manufacturing sector is still in contraction, while service sector activity is expanding. Consumer confidence remains weak, and households have not significantly increased spending due to the growth in real income