Eurostat data released on Friday showed the GDP of the 21 euro-zone countries grew 0.4% in the third quarter, confirming the October flash estimate and double what analysts had expected at the time.
This resilience comes despite the energy shock caused by the war with Iran: diesel prices in Europe are still 77% above pre-war levels, according to the International Energy Agency, keeping inflation at about twice the 2% target.
The European Central Bank has raised borrowing costs twice since the Middle East conflict sent energy prices soaring, and its officials are signalling a possible further increase in December. Bundesbank President Joachim Nagel told Bloomberg TV this week that policymakers may have to start restraining growth to reach the inflation target.
In Germany, the region’s largest economy, the parliamentary budget committee approved, after an all-night session, a 2027 spending plan of about €561 billion, including net new borrowing of about €123 billion, €4.25 billion more than the government’s draft, to fund defence and infrastructure.
Europe’s difficult equation, then: an economy that has so far withstood high rates, stubborn inflation and governments raising defence spending. Any further rate rise will test the endurance of households and businesses, especially as corporate insolvencies in Germany rise again.
Source: Eurostat, Sky News Arabia, International Energy Agency, Al-Ahram Gate
