Euro Zone Fails to Grow as Political Chaos Shakes Top Economies

The euro zone unexpectedly stagnated at the end of last year as government collapses in its top two economies bruised confidence among businesses and consumers, Bloomberg reported.

Fourth-quarter gross domestic product was unchanged from the previous three months, Eurostat said, defying analyst estimates that the 20-nation bloc eked out growth of 0.1%. Output fell 0.2% in Germany and 0.1% in France.

Over the whole of 2024, euro-area GDP rose 0.7%, Eurostat said.

The region is struggling to find growth drivers as a manufacturing malaise in Germany weighs on output and sentiment is soured by the threat of punitive trade measures from US President Donald Trump. Italy and Austria both saw GDP flatline.

Some help is on the way from the European Central Bank, which is widely expected to cut its deposit rate by another quarter-point later Thursday, to 2.75%. But policymakers in Frankfurt still have an eye on inflation. Separate data showed Spanish consumer prices rose 2.9% this month — more than analysts had expected.

Investors added to bets on ECB rate cuts, pricing 94 basis points of easing through year-end, compared with 89 basis points on Wednesday. That implies three quarter-point reductions and an almost 80% chance of a fourth.

Bonds extended gains, sending Germany’s 10-year yield six basis points lower to 2.53%. The euro fell 0.2% to about $1.04 — its lowest level of the day.