European economy: recovery, slow agony or what?

Is Europe on the eve of a growth acceleration or is it condemned to the “slow agony” described by Mario Draghi in his famous report of 2024? These two options are not irreconcilable as they do not cover the same time horizon. We will look here at the cyclical aspects. Several factors support the scenario of an economic upturn over the coming quarters. Firstly, after business confidence was weakened last year by the multiple waves of uncertainty sparked by Donald Trump, trade strains now seem to have stabilised or even receded, taking one weight off the shoulders of exporters. Secondly, there is some support on the consumer side. Inflation is low again and is no longer a subject of concern for Europeans, unlike Americans. The job market appears solid and the credit cycle is improving gradually. Real disposable income should grow. Thirdly, the German economy, moribund for years, is set to benefit from a huge fiscal impulse. Given its weight (30% of eurozone GDP), this should also improve demand addressed to its neighbours. In the face of these trends, there is no denying that many obstacles exist, the biggest threat in the short term being heightened competition from China.