Europe is growing again, but the weaker dollar looms as a threat

The European economy experienced modest growth at the end of 2025, overcoming initial concerns regarding US tariffs. The Eurozone, encompassing 21 countries, saw a 0.3% growth in the final quarter of the year. This growth defied earlier fears of a recession triggered by potential US tariff hikes on European goods. A deal capped US tariffs at 15%, but threats from Trump later resurfaced. Services businesses in Europe showed moderate expansion while exports struggled but are improving. Consumer spending increased due to lower inflation and rising wages. The weakening dollar against the euro poses a new challenge, making European exports less price-competitive. The dollar's decline stems from worries about US economic slowdown and attacks on the Federal Reserve. Analysts suggest the European Central Bank might cut interest rates to counter the stronger euro. Germany, the largest eurozone economy, showed improvement but faces various challenges including energy prices, labor shortages, and infrastructure issues. The broader EU also recorded 0.3% growth in the fourth quarter.