The European economy is shrouded in clouds: the dual challenges of low confidence and stagnant growth

Recently, the latest economic data released by the European Commission, the German government, and the International Monetary Fund (IMF) have revealed the harsh reality facing the European economy. The unexpected decline in consumer confidence index in the Eurozone, the significant downward adjustment of Germany's economic growth expectations, and the significant contraction of the UK's growth expectations have jointly outlined the picture of the European economy showing signs of fatigue.

According to data from the European Commission, the Eurozone's consumer confidence index fell from -14.5 to -16.7 in April, a decline that exceeded market expectations. This data continues the downward trend since 2024, reflecting consumers' deep pessimism about the economic outlook. The intensification of geopolitical tensions, fluctuations in energy prices, persistent inflationary pressures, and expectations of rising unemployment rates have all weakened consumers' purchasing power and willingness to consume. As the core driving force of economic growth, consumption's weak trend is directly transmitted to the real economy. The service industry, as the backbone of the Eurozone economy, has not fully recovered from the long-term impact of the pandemic lockdown measures, while the manufacturing industry continues to be under pressure due to weak global demand and supply chain disruptions. The deterioration of consumers' expectations for future employment and income has further suppressed non essential consumption, leading to severe challenges for industries such as retail and tourism that rely on consumption.

To cope with economic stagnation, the German Institute for Economic Research suggests that Germany should stimulate corporate investment as soon as possible through measures such as tax incentives, research and development support, and green transformation. In addition, robust labor market policies are also crucial, providing support for skill enhancement and career transition to address the risk of rising unemployment rates during the economic transformation process.

The IMF has lowered its 2025 economic growth forecast for the UK from 1.6% to 1.1%, the largest decline among major European economies. This adjustment not only reflects the long-term challenges facing the UK economy after Brexit, but also highlights the negative impact of US tariff policies on the UK economy. In the spring budget announced by the UK government on March 26th, the economic growth forecast for 2025 was lowered to 1%, which is a direct "halving" compared to the 2% forecast in October last year. The high level of uncertainty, weak confidence, and slowing global economic growth, combined with the direct and indirect impacts of US tariff policies, collectively constitute significant obstacles to the growth of the UK economy.

The current predicament faced by European economies is essentially the result of multiple external shocks and structural contradictions intertwined. The trade protectionism agenda of the new US government has brought new uncertainty to the European economy. The implementation of tariff policies not only directly impacts Europe's export-oriented manufacturing industry, but also indirectly suppresses the recovery of the European economy by affecting global supply chains and market demand. For example, German exports are facing difficulties due to declining corporate competitiveness, weak international demand, and the possibility of protectionist policies from the United States that may increase tariffs.

Faced with the current difficulties, European economies need to adopt multidimensional response strategies. At the policy level, it is necessary to accelerate structural reforms, stimulate corporate investment through measures such as tax incentives, research and development support, and green transformation, while strengthening robust labor market policies and providing support for skill enhancement and career transition. For example, the German Economic Research Institute suggests that Germany strengthen cooperation with its EU partners to jointly address changes in the global economic environment.

At the market level, enterprises should actively adjust their supply chain layout, reduce their dependence on a single market, and use digital technology to improve operational efficiency. Tesla is promoting the large-scale production of the humanoid robot Optimus through a large-scale recruitment program, demonstrating the empowering role of technological innovation in the manufacturing industry.

At the market level, it is necessary to strengthen international cooperation and respond to the impact of US protectionism through unified trade and tariff policies. Despite facing numerous challenges in the current European economy, there is still hope to gradually overcome the difficulties through multidimensional responses in policy, market, and technological innovation.

At the technical level, it is necessary to strengthen digitalization and green transformation to improve labor productivity; At the market level, it is necessary to optimize the supply chain layout and reduce dependence on a single market. Only through systematic reform, technological innovation, and international cooperation can the European economy gradually emerge from its difficulties and achieve stable recovery. For example, Germany can promote corporate investment through tax incentives and research and development support; The UK needs to work together with its EU partners to address changes in trade policies.