Eurozone News
LAST UPDATE: June 19, 2025
Eurozone is still held back by rising mortgage rates, ECB finds
According to an ECB study, higher mortgage payments—driven by rate resets on fixed‑rate loans—will suppress household consumption by about 1 percentage point from 2022–2030, with the impact still unfolding .
Insight
The findings highlight a persistent financial drag on the eurozone economy. Even as policy rates ease, the lingering effect of past hikes will limit growth and weigh on recovery.
ECB’s Villeroy calls on EU to set deadlines for financial sovereignty
ECB policymaker François Villeroy de Galhau urged the EU to establish firm deadlines—like by January 1, 2028—for financial integration, retention of domestic savings, and creation of a European AI Community to rival U.S. and China .
Insight
The proposal echoes post-war economic integration models and signals rising concern about Europe’s strategic dependence. Establishing clear timelines could accelerate capital markets union and AI competitiveness.
ECB’s Panetta Says Economic Outlook Faces Substantial Risks
ECB Governing Council member Fabio Panetta warned at a conference in Milan that the Eurozone’s economic outlook is threatened by unpredictable U.S. trade policies and the Israel–Iran conflict. He stated inflation is likely to remain below 2% for an extended period.
Insight
Panetta underscores the complexity and uncertainty confronting the ECB—from geopolitical turmoil to transatlantic trade tensions—highlighting the need for a flexible, meeting-by-meeting policy stance.
ECB’s Panetta Says EU a Victim of US Efforts to Distance Russia from China
Fabio Panetta criticized the U.S. for adopting a confrontational trade stance toward Europe, suggesting it’s driven by a strategy to detach Russia from China. He warned that this approach risks alienating EU partners.
Insight
This comment reveals division within the Western alliance, suggesting U.S. tactics in trade and diplomacy may unintentionally push the EU closer to Beijing–Moscow, complicating geopolitical coordination.
French economy to grow 0.6% this year, INSEE says
On June 18, the French statistical agency INSEE projected GDP growth of just 0.6% in 2025—down from 1.1% in 2024—citing stagnant manufacturing, weak exports, and public-sector spending cuts. Quarterly growth is expected to remain around 0.2%, while inflation averages 1.0% under national definitions (0.8% EU-harmonised) (reuters.com, reuters.com).
Insight
The sluggish forecast underscores France’s challenge: balancing public finances and slow domestic demand. Lower inflation provides relief, but weak output and external demand drag policy options, complicating deficit targets.
Merz Upbeat on State Backing for €46 Billion Tax-Break Package
German Chancellor Friedrich Merz expressed confidence on June 18 that regional governments will support his €46 billion corporate tax-cut package. It includes deductions for equipment and EV purchases, as well as phased corporate tax cuts through 2029 .
Insight
The package signals a bold attempt to revive Germany’s stagnating economy. By combining federal incentives and regional buy-in, Merz aims to stimulate investment, competitiveness, and growth.
Austrian government agrees on plan to allow monitoring of secure messaging
On June 18, Austria’s coalition government approved legislation permitting law enforcement to monitor encrypted messages (WhatsApp, Signal) for suspected terrorism and espionage. Surveillance requires a three-judge panel and is capped at 25–30 individuals annually, with introduction slated for 2027. (reuters.com, reuters.com)
Insight
Balancing security and privacy, Austria introduces a tightly regulated surveillance process to close intelligence gaps—especially after thwarting a planned terrorist plot via foreign assistance. The judicial oversight and limits aim to prevent mass intrusion while strengthening domestic monitoring.
