Europe’s economy ended 2025 with modest momentum, according to Eurostat data released Friday, but the outlook is now clouded by currency pressures and lingering trade uncertainty tied to U.S. tariffs. The eurozone’s growth rate for the last three months of 2025 came in at 0.3%, the same as in the previous quarter, according to the EU statistics agency.
Compared with the same period a year earlier, Eurostat reported that eurozone growth was 1.3% in the fourth quarter of 2025. The figures add to evidence that recession fears that circulated earlier in 2025—after then-U.S. President Donald Trump threatened to raise tariffs to levels that analysts warned could damage trade—did not materialize as sharply as some feared.
The earlier tariff episode had appeared to cool when negotiations produced a 15% cap on U.S. tariffs, or import taxes, on goods from the European Union, giving companies a clearer basis to plan. That sense of certainty was later dented after the quarter ended, when Trump on Jan. 17 threatened EU member countries with higher tariffs linked to support for Greenland in response to his calls for a U.S. takeover; Trump later withdrew the threat.
Even with growth holding up, the composition of activity matters. European services businesses—ranging from hairdressers to medical treatment—showed moderate growth in the latest S&P Global survey of purchasing managers, the report said. The same reporting noted that exports “have tanked,” leaving the industrial-facing side of the economy behind even as services improved toward the end of 2025.
Inflation easing and rising wages helped support consumer spending, according to the report. It cited lower inflation of 1.9% in December, after a painful spike in 2022 and 2023, alongside wages that left households with more purchasing power and a greater willingness to spend.
A new concern has emerged from the dollar’s rapid fall versus the euro. The report said the dollar was at its weakest for 4 1/2 years and that this makes European exports less competitive on price in a key foreign market. It attributed the euro’s rise—14.4% against the dollar over the past 12 months and trading at $1.19 on Friday—to fears that Trump’s tariffs could slow growth and to concerns that Trump’s attacks on Federal Reserve Chair Jerome Powell could weaken the U.S. central bank’s ability to fight inflation and protect the dollar’s value.
Currency moves can also shape central-bank expectations. Analysts said that if the dollar’s weakness persists, the European Central Bank may cut interest rates later this year to stimulate growth. The ECB has a rate-setting meeting on Thursday, but the report said it was not expected to change rates then.
Germany, the eurozone’s largest economy, showed some improvement in the latest quarter, recording growth of 0.3% in the fourth quarter—its best quarterly performance in three years—while still facing broader headwinds. The report cited infrastructure and defense spending set in motion by Chancellor Friedrich Merz, with Germany still waiting to see effects in stronger growth; it also noted that Germany grew 0.2% last year, its first year of growth after two years of contracting output.
The German economy’s longer list of pressures included higher energy prices after the loss of Russian natural gas tied to the war in Ukraine, a shortage of skilled labor, intensifying competition from China in export sectors such as autos and industrial machinery, years of underinvestment in infrastructure meant to support growth, and what the report described as too much red tape. Separately, it said the government on Wednesday cut its growth outlook for this year to 1% from 1.3% previously.
For the broader European Union, Eurostat reported that growth also came in at 0.3% in the fourth quarter of 2025 and 1.4% compared with the year-earlier quarter. The report added that the euro has 21 member countries because not every EU state has adopted the shared currency, and it said the euro gained its 21st member in January when Bulgaria joined.