EU Economy: Weekly Commentary – November 17, 2025

European Market Review

European yields rose except France; Germany’s auction signalled higher costs. Italy’s spread narrowed. Equities climbed, euro strengthened, and Brent gained on supply disruptions and demand forecasts.

Last week, European bond yields generally rose, with the exception of France, where prices saw a modest increase. Germany’s 30-year bond auction yielded 3.32%, reflecting higher refinancing costs and approaching levels last observed in 2011. Risk perceptions across the Eurozone are shifting, with Italy receiving an upgrade and the 10-year spread over Germany falling to its lowest point since 2010. European equity markets closed the week higher, led by gains in Spain (2.80%) and France (2.77%). The euro appreciated 0.50% against the US dollar. Brent crude rose 0.50%, driven by supply disruptions following the Ukrainian attack on the Sheskharis oil terminal in Novorossiysk, operated by Transneft, which temporarily halted exports of roughly 2.2 million barrels per day, nearly 2% of global supply. These disruptions, combined with the IEA’s upward demand forecasts and logistical constraints on sanctioned oil from Russia, Iran, and Venezuela, constrained effective supply and supported higher prices.

Europe View Synopsis

Eurozone GDP grew 0.2% QoQ in Q3. EU expanded 0.3%. Spain and France gained. Germany stagnant. Employment rose 0.2%. Trade surplus surged. Industrial production modestly increased.

In Q3 2025, Eurozone GDP grew 0.2% QoQ, up from 0.1% in Q2, while the EU as a whole expanded 0.3% QoQ. Spain led the major economies with 0.6% growth, France picked up to 0.5%, and Germany remained flat after a -0.2% contraction in Q2. Policymakers in Berlin introduced measures including fixed energy prices for industry, new gas plants, and SME support to address structural and cyclical challenges. Employment rose 0.2% QoQ, signalling resilience in the labour market, while the trade surplus surged to €19.4 billion, boosted by US-bound exports of chemicals, pharmaceuticals, and machinery. Eurozone industrial production edged up 0.2% in September, with gains in intermediate goods, energy, and capital goods partially offset by declines in consumer goods. Despite modest improvements, growth remains constrained by structural weaknesses, a strong euro, global competition, and the impact of tariffs, suggesting that both GDP and industrial activity are likely to remain subdued in the near term.

GDP

Eurozone GDP grew 0.2% QoQ in Q3. EU expanded 0.3%. Spain and France gained. Germany stagnant. Trade surplus surged. Employment rose 0.2%. ECB signals cautious optimism.

The Eurozone economy grew 0.2% QoQ in Q3 2025, up from 0.1% in Q2, while the wider EU accelerated to 0.3% QoQ, building on 0.2% in the previous quarter. Spain led the bloc’s major economies with 0.6% QoQ growth, slowing slightly from 0.8% in Q2, while France picked up to 0.5% QoQ from 0.3%. Germany, meanwhile, remained flat after a -0.2% contraction in Q2, as policymakers moved quickly to shore up the economy. In the past 24 hours, Berlin unveiled measures including fixed energy prices for energy-intensive industries, new gas power plants, and a fund to support SMEs—an acknowledgment of the country’s structural and cyclical challenges. Across the Eurozone, employment rose 0.2% QoQ, underscoring the resilience of the labour market amid a measured recovery. Trade also provided a boost, with the Eurozone surplus surging to €19.4 billion in September, driven by strong US-bound exports of chemicals, pharmaceuticals, and machinery. ECB President Christine Lagarde said the modest growth shows room for improvement, while Vice President Luis de Guindos described the outlook as “marginally more optimistic,” emphasizing that the expansion, though slow, is not a recession.

We expect the EU to remain in a period of low growth due to structural weaknesses, muted domestic demand, global uncertainties, and uneven recovery across member states.

Industrial Production

Eurozone industrial production rose 0.2% in September, remaining broadly flat since April; recovery varied by country and sector, with cautious optimism tempered by tariffs, strong euro, and global competition.

Eurozone industrial production edged up 0.2% in September following a -1.1% contraction in August, leaving overall output broadly unchanged since April, when the US frontloading surge eased. The modest rebound reflected both the inherent volatility of Irish data (-9.4% after a 9.5% increase in August) and only a partial recovery in Germany, although Italy, Spain, and France largely recouped their prior declines. By sector, production increased for intermediate goods (+0.3%), energy (+1.2%), and capital goods (+0.3%), while durable (-0.5%) and non-durable consumer goods (-2.6%) fell. Despite concerns over US tariffs, the Eurozone has avoided a significant downturn, and output remains above the 2024 average, indicating a moderate upshift in manufacturing activity without meaningful growth. Large public investment initiatives have yet to translate into a substantial acceleration, though manufacturers’ sentiment is cautiously positive, supported by improving order book assessments and expectations of forthcoming investment. Nonetheless, a strong euro, heightened global competition, and the ongoing impact of tariffs suggest that any short-term recovery in the sector is likely to be gradual and measured.

We expect Eurozone industrial production to remain subdued, as in Germany, where output has only partially recovered, while US tariffs, a strong euro, and global competition continue to weigh on growth. The Eurozone is also falling behind in innovation, eroding its competitiveness.