At the end of 2024, the process of implementing a stagnation scenario suddenly began in the eurozone economic system.
The mentioned state of affairs is the result of significant political turbulence in France and Germany. What happened in these countries was described by many media outlets as the collapse of governments. It is worth clarifying that certain revolutionary or similar events are not implied in the relevant context. The difficult internal situation in France and Germany has provoked stagnation throughout the eurozone because the economies of the mentioned countries are the largest in the region.
The data, which was published by Eurostat, indicates that the gross domestic product (GDP) of the eurozone in the fourth quarter of 2024 showed no changes compared to the previous three months. At the same time, analysts interviewed by the media predicted that the mentioned indicator for the specified period would grow by 0.1%.
Output in Germany fell by 0.2% in the last quarter of 2024. In France, this indicator decreased by 0.1% over the same period.
The data published by Eurostat also shows that for the whole of 2024, the eurozone’s GDP grew by 0.7%.
Currently, the mentioned region is in a kind of search for incentives for an upward economic dynamic. Germany is facing manufacturing malaise. Berlin’s prospects are deteriorating amid the likelihood that President of the United States Donald Trump will tighten US trade policy, including regarding the European Union. If this scenario is implemented, Germany, for which economic growth is becoming more and more a theoretically probable condition rather than a realistic prospect, will face a very serious blow to GDP. Snap elections will be held in this country next month, which were planned against the background of a break up of the ruling coalition. According to preliminary forecasts, it is highly likely that Friedrich Merz, who heads the conservative CDU/CSU bloc and promises to reduce taxes and fewer regulations, will oust Olaf Scholz as chancellor. Some experts suggest that after the elections, the German government will focus on the goal of economic growth. At the same time, most analysts are skeptical about the likelihood that the country’s GDP will be on an upward trajectory due to political changes.
The French government was forced to rely on stopgap legislation to avoid a shutdown. Last year, the fiscal shortfall in this country was about 6% of output. Paris is facing such negative circumstances in the current configuration of economic reality as poor tax revenue and soft GDP growth.
Negotiations on France’s full budget for 2025 are expected to conclude next week. The media reported that the country’s Prime Minister Francois Bayrou may be forced to resign amid certain voting results on his tax-and-spend plans.
French companies have been increasingly showing discontent lately. Bernard Arnault, the billionaire chief executive of LVMH Moët Hennessy Louis Vuitton SE, said that extra corporate taxes in the government budget can push investments abroad.
