Eurozone News
LAST UPDATE: June 25, 2025
Euro at highest against dollar since October 2021 after US Fed chair remarks
The euro surged to around $1.1642 – its strongest level since October 2021 – after U.S. Federal Reserve Chair Jerome Powell’s remarks weakened the dollar, supported by broader risk appetite due to a ceasefire in the Middle East (en.hespress.com).
Insight
This illustrates how shifts in global sentiment—like geopolitical de-escalation and dovish Fed signaling—can swiftly impact currency markets, boosting risk assets and prompting near-term interventions.
ECB’s Lane Says Disinflation Process Is ‘Largely Completed’
ECB Chief Economist Philip Lane stated that the eurozone appears to have mostly returned inflation to the 2% target, with headline inflation near target though services inflation remains slightly elevated .
Insight
Lane’s assessment signals the ECB may pause further rate cuts, pivoting from aggressive easing to vigilance—highlighting the challenge of addressing persistent services inflation while avoiding premature loosening.
ECB’s Challenge Is to Ensure Short‑Term Price Shifts Don’t Become Long‑Lasting, Says Lane
At an event in London on June 24, 2025, ECB Chief Economist Philip Lane emphasized that while the ECB has “largely” achieved its inflation targets, the central bank must prevent temporary shocks—such as energy or trade-related price swings—from becoming entrenched. He highlighted the importance of safeguarding the medium‑term inflation goal amid global volatility, especially with lingering services inflation above 3%. (marketscreener.com, marketscreener.com)
Insight
Lane’s remarks underscore the ECB’s delicate balancing act: ceasing aggressive rate cuts while staying alert to external shocks that could jeopardize price stability. It signals a cautious, data‑responsive approach rather than a firm easing cycle.
ECB’s Kazimir: would not touch rates until trade war scenarios clearer
ECB policymaker Peter Kazimir said the bank is “nearly done” with rate cuts and will await clearer signs on global trade tensions before adjusting policy further .
Insight
His caution reflects sensitivity to external risks—like tariffs—that could significantly alter inflation, reinforcing ECB’s data-driven, patient stance in a volatile global environment.
Merz Vows to Boost Defense Spending Ahead of Key NATO Summit
German Chancellor Friedrich Merz pledged significant increases in defense spending—targeting 3.5% of GDP for core military investment plus 1.5% on defense-relevant infrastructure—calling it necessary in final strategy ahead of the Hague NATO Summit .
Insight
Merz’s commitment marks a historic shift, lifting longstanding domestic limits on military spending and signaling a deeper German engagement in NATO in response to U.S. pressure and Russian threats.
France’s Socialists to submit no-confidence bill amid pensions dispute, weakening Bayrou
France’s Socialist Party has lodged a no-confidence motion against Prime Minister François Bayrou after pension reform negotiations collapsed; unlikely to pass as far-right parties won’t support it (x.com, reuters.com).
Insight
The move highlights mounting political pressure on Bayrou amid public discontent over pension changes, revealing fractures in both left and far-right blocs and raising the risk of government instability ahead of budget decisions.
Portugal swings to 0.2% budget surplus in first quarter
Portugal achieved a budget surplus equal to 0.2% of GDP in Q1, reversing a 0.4% deficit in the previous year, driven by stronger revenue and disciplined spending despite economic contraction .
Insight
The swing to surplus indicates effective fiscal management and may strengthen Portugal’s position in EU budget discussions, though the underlying economic slowdown suggests structural vulnerabilities remain.
EU has asked Italy for details on the November MPS stake placement, source says
The European Commission has requested information from Italy regarding the government’s October–November placement of a 15% Monte dei Paschi di Siena stake, amid concerns large investors may have been excluded .
Insight
The request signals regulatory scrutiny from Brussels and could trigger a state-aid inquiry, complicating Italy’s push for banking consolidation and raising transparency concerns about the privatization process.
