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The euro zone economy will grow more slowly this year and next because of the trade war started by the United States and uncertainty over when and how it will end, said the European Commission.
According to the forecast for the 27 countries of the European Union and the 20 countries sharing the euro currency, euro zone gross domestic product will grow only 0.9% this year, rather than the 1.3% expected last November. In 2026, euro zone growth should accelerate to 1.4%, but that would be still lower than the 1.6% the Commission had expected six months ago.
It said the growth outlook was based on an assumption that the U.S. would keep its tariffs at the current level of 10% on all EU goods, 25% on steel, aluminium and cars and no tariffs on pharmaceuticals and semiconductors.
But growth could pick up if there was a de-escalation of EU-U.S. trade tensions or faster expansion of Europe's trade with other countries as well as through higher EU defence spending.
But euro zone public finances will deteriorate slightly, with the aggregate budget deficit inching up to 3.2% of GDP this year from 3.1% last year and rising to 3.3% in 2026. The aggregated euro zone public debt is likely to increase.
Source: reuters.com