The European economy showed a slight improvement at the beginning of the year, with 0.3% growth in the January-March quarter compared to the previous quarter. This was the strongest performance since the third quarter of 2022 for the 20-country eurozone, which had been experiencing shrinkage in the last two quarters of 2023.
Despite this, record high interest rates from the European Central Bank have raised the cost of credit for businesses and consumers. High inflation and an energy price spike, due to Russia cutting off natural gas supplies, had been holding back the European economy. However, energy prices have fallen and inflation dropped to 2.4% in April, easing these challenges.
The possibility of the European Central Bank cutting its benchmark rate in June from the current 4% has been suggested, as inflation is nearing the bank’s goal of 2%. Germany still faces long-term issues such as excessive bureaucracy, a shortage of skilled workers, and lagging digital technology adoption. Despite these positive signs, structural weaknesses in Germany and ongoing challenges in other European countries may limit the pace of economic rebound this year.
France reported 0.2% growth while Spain was one of the top performers with 0.7%. Ireland’s 1.1% gain also contributed to the overall eurozone figure, reflecting