The eurozone economy experienced a notable deceleration in the second quarter of 2025, challenging earlier expectations of a robust recovery, despite slightly surpassing modest analyst forecasts. Following what appeared to be a strong start to the year, recent data reveals a fundamental lack of momentum across the bloc, highlighting significant divergence in national performances and raising questions about the sustainability of growth in key member states.
- Eurozone GDP growth decelerated significantly to 0.1% in Q2 2025.
- This represents a sharp slowdown from the 0.6% expansion recorded in Q1 2025.
- Spain was a standout performer, achieving 0.7% growth, contrasting with contractions of 0.1% in Germany and Italy.
- Financial markets reacted with relative calm, with the euro stabilizing and major indices showing marginal movements.
- Corporate earnings were mixed, with strong performances from Danone and L’Oréal, while Adidas and Mercedes-Benz Group faced declines.
Gross Domestic Product (GDP) in the eurozone expanded by a mere 0.1% quarter-on-quarter, with the broader European Union seeing a 0.2% increase. This marks a substantial slowdown from the first quarter of 2025, which saw expansions of 0.6% for the eurozone and 0.5% for the EU. Year-on-year growth also softened, with the eurozone growing 1.4% and the EU 1.5%.
According to Riccardo Marcelli Fabiani, a senior economist at Oxford Economics, the slowdown, while partly a byproduct of an “overly healthy” Q1 figure, points to a broader underlying weakness. “Broad-based weakness across national data indicates that the economy lacks momentum, with only a handful of countries blowing into its sails,” Fabiani observed, underscoring the fragmented nature of the recovery.
Divergent National Trajectories
The economic picture across the continent was anything but uniform. Spain emerged as a notable outperformer, registering robust 0.7% quarterly growth. This strong performance was primarily driven by solid consumer spending, a significant rebound in business investment, and rising exports, positioning Spain in a distinct category of dynamism. Portugal and Estonia also posted strong results, expanding by 0.6% and 0.5% respectively.
Conversely, economic powerhouses like Germany and Italy faced contractions. Germany’s GDP shrank by 0.1%, marking its first contraction since mid-2024, largely attributed to weaker investment in machinery and construction. Italy also saw its GDP contract by 0.1% in Q2, reversing its Q1 gain, driven by weak domestic demand and softening industrial activity. France offered a glimmer of positive news with a 0.3% expansion, its best in nearly a year, aided by stronger domestic demand, though analysts at Oxford Economics cautioned that this figure was largely influenced by stockbuilding rather than underlying demand or trade.
Market Response and Corporate Performance
Financial markets reacted with relative calm to the economic data, with eurozone assets stabilizing after recent volatility stemming from a US-EU trade deal, widely perceived as more favorable to Washington than Brussels. The euro held steady at $1.1550, partially recovering from its most significant two-day drop since February 2023. Major indices like the EURO STOXX 50 saw a marginal 0.1% increase, while the broader EURO STOXX 600 remained largely flat. Germany’s DAX index was unchanged, and Italy’s FTSE MIB climbed 0.3%, reaching its highest point since July 2007.
Corporate earnings provided mixed signals. French consumer staples giants Danone and L’Oréal were among the top performers, seeing rises of 6.7% and 4% respectively, buoyed by robust quarterly earnings and strong demand from China. Nokia also rallied significantly. In contrast, sportswear firm Adidas experienced a notable decline of over 6% following a revenue miss and a profit warning. Similarly, Mercedes-Benz Group shares dropped after reporting a halving of its first-half profits and reducing its full-year revenue forecast below the previous year’s €146 billion.
Jonathan Reed received his MA in Journalism from Columbia University and has reported on corporate governance and leadership for major business magazines. His coverage focuses on executive decision-making, startup innovation, and the evolving role of technology in driving business growth.