After a strong start to the year, the eurozone economy lost some steam in the second quarter of 2025, with fresh data showing a clear slowdown. Germany, the bloc’s economic powerhouse, fell back into contraction territory, while Spain continued to outpace its peers.
According to the preliminary flash estimate released on Wednesday, seasonally adjusted gross domestic product (GDP) rose by 0.1% in the eurozone and by 0.2% in the European Union in the second quarter of 2025, compared with the previous quarter.
While the reading slightly surpassed economist expectations of a flat growth rate, this marks a notable deceleration from the 0.6% and 0.5% expansions seen in the eurozone and EU respectively in the first quarter.
Year-on-year, growth also eased a little, with the eurozone up 1.4% and the EU up 1.5%, both slightly below the pace seen earlier in 2025.
"Although the slowdown is to a large extent a by-product of a misleadingly healthy Q1 number, broad-based weakness across national data indicates that the economy lacks momentum, with only a handful of countries blowing into its sails," said Riccardo Marcelli Fabiani, senior economist at Oxford Economics.
Spain and Portugal shine, Germany drags
The slowdown wasn’t uniform across the continent.
Spain stood out with the strongest quarterly growth at 0.7%, thanks to solid consumer spending, a rebound in business investment, and rising exports.
"Spain is in another league, showing stubbornly robust dynamism. The moderate Q2 decline in Irish GDP suggests that there is ample room for further correction," Marcelli Fabiani added.
Portugal and Estonia also delivered solid results, expanding by 0.6% and 0.5%, respectively.
On the other hand, Germany shrank by 0.1%, ending a run of modest growth. It marked the country’s first contraction since mid-2024.
The decline was mainly due to weaker investment in machinery and construction, although household and government spending still offered some support.
Italy’s GDP contracted by 0.1% in the second quarter, reversing the 0.3% gain recorded in the first quarter and defying market expectations of a 0.2% increase. It was the country’s first contraction since Q2 2023, reflecting weak domestic demand and softening industrial activity.
There was some good news from France, where the economy picked up more than expected. GDP rose 0.3% — the best result in nearly a year — helped by stronger domestic demand.
Yet Oxford Economics remains cautious, noting that France’s expansion paints an overly rosy picture, driven largely by stockbuilding, while both domestic demand and net trade actually dragged on GDP.
Markets steady as investors digest US-EU trade deal
Financial markets responded calmly to the data, with eurozone assets stabilising following recent volatility tied to the US-EU trade deal, which analysts broadly view as tilting in Washington’s favour over Brussels.
The euro was steady at $1.1550, recovering slightly after enduring its worst two-day drop since February 2023.
The EURO STOXX 50 index edged 0.1% higher, while the broader EURO STOXX 600 was flat.
French consumer staples were among the top performers, with Danone rising 6.7% and L’Oréal up 4% after reporting strong quarterly earnings boosted by Chinese demand.
Nokia also rallied 5.4%. In contrast, Adidas fell over 6% following a revenue miss and a profit warning, while Mercedes-Benz Group dropped 1% after reporting a halving of its first-half profits and cutting its full-year revenue forecast below last year’s €146 billion.
Germany’s DAX index was unchanged at 24,200 points, about two percentage points below its all-time high, while Italy’s FTSE MIB climbed 0.3% to 41,350 points, its highest since July 2007 and eyeing its ninth positive session in the last ten.
