Overview
- The European Commission projects EU growth of 1.4% in 2026, with Germany at 1.2% and the euro area at 1.2%, and now sees Germany growing 0.2% in 2025 after previously forecasting stagnation.
- The outlook is an upward revision from spring estimates and leans on domestic demand supported by stronger real incomes and favorable financing conditions.
- The Commission warns that higher trade barriers, geopolitical uncertainty and potential supply disruptions could weigh on investment and exports.
- The autumn European Semester package arrives next week with fiscal recommendations, as Austria faces extra scrutiny with forecast 2026 growth of 0.9% and a deficit near 4.1%, well above the 3% limit.
- Other forecasts diverge, with the IMF and Germany’s economic advisers near 0.9% for 2026 versus the German government’s 1.3%, while euro-area inflation is seen easing toward the ECB’s 2% goal by 2027.