Is Germany's economic decline dragging down Europe

Europe's economy stagnated at the end of 2024, with Germany contributing to this trend through a second consecutive year of declining output. Eurostat reported flat GDP for the eurozone in the final quarter of 2024, following modest growth of 0.4% previously. Businesses expressed concern about potential trade disruptions from the new U.S. administration. Consumer spending remained cautious, impacted by inflation, which decreased from a peak of 10.6% in October 2022, yet still posed a challenge. Germany experienced a 0.2% contraction in economic output for both the fourth quarter and the entire year. The government's growth forecast for 2025 dropped from 1.1% to 0.3%, amid political instability creating uncertainty for businesses and consumers. Germany's national election on February 23 may provide clarity after the coalition government's collapse. France faced fragmented politics, hindering solutions for its budget deficit. U.S. presidential changes raised concerns about import tariffs affecting Europe’s export-driven economy. Anticipated cuts to the European Central Bank's interest rate could stimulate growth, while rising energy prices pushed inflation up to 2.4%, adding complexity to consumer behavior and spending.

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