On 17 November, the European Commission released a new set of short-term economic projections (these forecasts are published twice a year, in spring and autumn).
In a year, much can change, and while some factors such as geopolitical risks and the fragile political environment in France remain, much has shifted since last autumn. Most notably, Trump’s return to the White House at the beginning of this year triggered a global trade war, alongside Germany’s historic decision to suspend the constitutional debt brake, allowing for a significant (and welcome) increase in borrowing and investment in defence and infrastructure in the coming years.
Naturally, these developments led the European Commission to revise its economic projections for the bloc. While labour market forecasts for the coming years have remained largely unchanged—mainly supported by a resilient services sector—and inflation is expected to stay close to the ECB’s 2% target, projections for GDP and the fiscal deficit have undergone the most significant revisions.
The growth forecast for this year was revised down by 0.1 pp compared with last autumn’s projections (to 1.4%). However, GDP growth for 2026 was revised down by 0.4 pp, to 1.4%, reflecting persistent uncertainty over trade policy as well as adverse demographic and labour-related factors. The public deficit also underwent a significant revision: +0.3 pp to 3.3% in 2025 and +0.5 pp to 3.4% in 2026, reflecting not only Germany’s previously mentioned spending plans but also slower-than-expected fiscal consolidation in some Member States, against a backdrop of weaker growth and political challenges.
Among the region’s largest economies, the projections for Germany, France, and Italy stand out.
In Germany, the robust public spending plan is expected to boost growth to 1.2% in 2026 and 2027, up from 0.2% in 2025, but it will also lead to an increase in public debt (projected to rise to 67% of GDP in 2027, from 63.5% in 2025).
Italy’s fiscal consolidation path is finally bearing fruit, with deficits expected to decline from 3% this year to 2.6% in 2027, resulting in only a slight increase in public debt (+0.8 pp) over the period. However, unlike Germany—where fiscal policy is set to support growth—Italy’s growth trajectory over the next three years is less clear, translating into very modest growth projections (0.8% in 2026 and 2027).
France’s growth in the coming years is expected to be supported by robust domestic dynamics and a recovery in investment. While the Commission, based on the draft 2026 Budget, anticipates some degree of fiscal consolidation next year (with the deficit still at 4.9% of GDP), in 2027 the deficit is expected to rise again to 5.3% of GDP as some revenue-boosting measures expire.
In summary, the comparison between the two sets of projections shows that, despite inflation being under control and the labour market remaining solid, Europe is likely to continue facing weak growth and higher debt levels.
Reference links:
- EU Projections: https://economy-finance.ec.europa.eu/economic-forecast-and-surveys/economic-forecasts/autumn-2025-economic-forecast-shows-continued-growth-despite-challenging-environment_en#:~:text=Altogether%2C%20this%20forecast%20projects%20real,and%20by%201.4%25%20in%202027 | https://economy-finance.ec.europa.eu/economic-forecast-and-surveys/economic-forecasts/autumn-2025-economic-forecast-shows-continued-growth-despite-challenging-environment_en#:~:text=Altogether%2C%20this%20forecast%20projects%20real,and%20by%201.4%25%20in%202027
- France: https://economy-finance.ec.europa.eu/economic-surveillance-eu-member-states/country-pages/france/economic-forecast-france_en
- Italy: https://economy-finance.ec.europa.eu/economic-surveillance-eu-member-states/country-pages/italy/economic-forecast-italy_en
- Germany: https://economy-finance.ec.europa.eu/economic-surveillance-eu-member-states/country-pages/germany/economic-forecast-germany_en
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