The European Union has delivered a sobering assessment of the eurozone's economic prospects, scaling back growth expectations for 2026 amid escalating international trade tensions and geopolitical uncertainties that continue to cloud Europe's economic horizon.
Revised Economic Projections
In an announcement made on Monday, November 17, 2025, the European Commission revealed it now anticipates the 20-nation single currency area to expand by 1.2 percent in 2026, marking a noticeable reduction from the previous forecast of 1.4 percent made earlier this year. The downward revision reflects growing concerns about the impact of global trade restrictions on Europe's export-dependent economies.
The commission specifically highlighted that Europe's "highly open" economic structure remains particularly vulnerable to ongoing trade barriers and protectionist measures. However, officials noted that recent trade agreements between the United States and various partners, including the European Union itself, have helped mitigate some uncertainties in international commerce.
Inflation Outlook Worsens
Alongside the growth downgrade, Brussels also adjusted its inflation expectations upward. The commission now projects eurozone inflation will reach 1.9 percent in 2026, compared to the previous estimate of 1.7 percent. For the nearer term, inflation in the single currency area is expected to hit 2.1 percent in 2025, bringing it within close range of the European Central Bank's two-percent target.
Analysts noted that while food and services price increases show signs of moderation, this positive development is being "counterbalanced by rising energy inflation" according to the commission's statement. The complex interplay of slowing price growth in some sectors against accelerating costs in energy illustrates the challenging environment facing European policymakers.
Broader EU Economic Picture
The economic reassessment extends beyond the eurozone to encompass the entire 27-country European Union. The commission expects the broader EU to achieve growth of 1.4 percent in 2026, slightly below the 1.5 percent predicted in May. This more modest revision suggests that non-euro member states may be somewhat less exposed to the trade-related headwinds affecting their single-currency counterparts.
Despite the challenging outlook, EU economic chief Valdis Dombrovskis struck an optimistic tone, emphasizing that "Even in an adverse environment, the EU's economy has continued to grow." His comments suggest that while external pressures are mounting, the fundamental resilience of European economies remains intact.
The commission's statement explicitly warned that "persistent trade policy uncertainty continues to weigh on economic activity" and that both tariffs and non-tariff restrictions could constrain EU growth more significantly than previously anticipated. This acknowledgment underscores the delicate balancing act facing European leaders as they navigate an increasingly fragmented global trading landscape.
