Euro area growth outperforms in 2025, outlook steady for 2026

Euro area economic growth in 2025 has exceeded expectations, driven by stronger investment and consumption and supported by funding from the EU’s Recovery and Resilience Facility (RRF), the Eurogroup said.

Growth is expected to continue at a moderate pace in 2026, underpinned by robust labour markets and favourable financing conditions. Inflation has decelerated and is expected to stabilise around the 2 per cent target. However, external risks remain elevated and could weigh on the outlook.

The euro area’s aggregate fiscal deficit is projected to rise to 3.2 per cent of GDP in 2025 and 3.3 per cent in 2026. Public debt is forecast to increase to 88.8 per cent of GDP in 2025 and 89.8 per cent in 2026, according to the European Commission’s Autumn Forecast.

The Eurogroup welcomed the submission of draft budgetary plans for 2026 and reaffirmed the importance of the revised economic governance framework.  Fiscal policy in both 2025 and 2026 is expected to remain broadly neutral.

The Eurogroup stressed the need for restraint in current expenditure, particularly in high-debt countries, alongside increased RRF absorption and investment to support long-term growth. It said it will continue close monitoring of fiscal and economic developments to ensure sustainable growth and competitiveness across the euro area.

“We are committed to the effective implementation of the fiscal framework and to sound public finances, which support sustainable growth. We underline the importance of reviewing the quality of both government revenue and expenditure, in light of the multiple demands on public finances,” the Eurogroup said in a release.

ALCHEMPro News Desk (HU)