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Europe's economy stagnated at the end of last year as former growth engine Germany floundered to the end of a second straight year of shrinking output, officials said Thursday. Gross domestic product was flat with a zero increase in the final quarter of 2024 in the 20-nation eurozone, EU statistics agency Eurostat said. The economy slowed from 0.4% growth in the third quarter as businesses were unsettled by possible trade disruptions under the new administration of U.S. President Donald Trump and as consumers remained cautious with spending after being stung by inflation. Germany, labouring under multiple headwinds including the loss of cheap energy from Russia, choking bureaucracy and political paralysis in Berlin, shrank by 0.2% in the fourth quarter. The German economy, Europe's largest, also shrank for all of 2024 by 0.2%, the second straight year of declining output. And the outlook for this year isn't much better. The government slashed its 2025 forecast on Wednesday to 0.3%
Even before the French and German governments collapsed, Europe's economy had enough difficulties. Tepid growth and lagging competitiveness versus the US and China. An auto industry that's struggling. Where to find billions for defense against Russia? And now Donald Trump threatening tariffs. Solutions will be harder to find while the two countries that make up almost half of the eurozone economy remain stuck in political paralysis well into 2025. Where once there was the so-called French-German axis to push Europe ahead, now there's a vacuum. French Prime Minister Michel Barnier resigned Thursday after losing a vote of confidence, and while President Emmanuel Macron will appoint a successor, the new head of government will lack a majority. Elections are not constitutionally permitted until at least June. Germany's coalition led by Social Democratic Chancellor Olaf Scholz with the Greens and pro-business Free Democrats fractured in November, triggering an early election on Feb. 23.