The eurozone economy expanded by 0.4% in the first quarter of 2025, according to preliminary figures released by Eurostat on Wednesday. The outcome, which marks the fifth consecutive quarter of growth, outpaced expectations of 0.2% and signals a modest pickup in economic momentum across the 20-member currency bloc.
The quarterly expansion doubled the 0.2% growth recorded in the final three months of 2024, providing a measure of reassurance to policymakers navigating through a period of sticky inflation and high interest rates. On an annual basis, seasonally adjusted GDP rose by 1.2%, unchanged from the previous quarter.
The broader European Union economy grew by 0.3% in the first quarter, a slight deceleration from the 0.4% gain recorded in the final quarter of last year. Year-on-year, the EU’s GDP also increased by 1.4%, maintaining the same pace as the prior quarter.
Ireland, Spain and Lithuania drive growth
Among the Member States with available data, Ireland posted the most robust quarterly performance, with GDP surging 3.2%. Spain and Lithuania followed with 0.6% expansions each.
Germany, the bloc’s largest economy, managed to exit its brief downturn, registering 0.2% growth in the first quarter after contracting by 0.2% at the end of 2024, in line with analyst forecasts.
France, meanwhile, posted marginal growth of 0.1%, up from a 0.1% contraction in the prior quarter, though the figure came in below expectations of 0.2%. Hungary was the only EU country to record a quarterly contraction, shrinking by 0.2%.
Market reaction muted ahead of key US data
Financial markets were broadly steady following the release. The euro held firm at $1.1370 by 11:20 CET, as investors awaited fresh GDP and inflation data from the United States later in the day.
Sovereign bond yields in the eurozone slipped slightly, with German 10-year Bund yields down 3 basis points to 2.46%, unwinding gains made in the wake of Germany’s fiscal policy announcements in March.
European equity markets painted a mixed picture. The Euro STOXX 50 index fell 0.3% to 5,160 points, dragged lower by sharp declines in Spanish banking shares. Banco Santander dropped 4.8% and BBVA fell 2.5%, despite the latter reporting better-than-expected earnings.
Deutsche Bank declined 2% as concerns over trade tariffs clouded the outlook, despite a solid earnings beat. The broader banking sector was under pressure, with Caixabank, Crédit Agricole and Erste Bank falling 5%, 4.5% and 4%, respectively.
In contrast, Germany’s DAX index outperformed, gaining 0.8%, buoyed by strong performances from Deutsche Post, Rheinmetall and Deutsche Börse, which each rose between 2% and 3%.
