Eurozone GDP Surges 0.4% in Q3, Germany Beats Forecasts With 0.2% Growth

The eurozone economy grew 0.4% in the third quarter, twice the 0.2% pace analysts had forecast, according to data released Friday by EU statistics agency Eurostat. Compared with the same quarter a year earlier, gross domestic product in the 21 countries using the euro rose 1.3%.

Germany, the bloc’s largest economy, posted 0.2% growth, beating analyst estimates. The expansion was supported by rising public and private spending, though exports weakened noticeably from the “very dynamic trend” seen in the first half of 2026 and investment declined, statistics office Destatis said. The economy faced headwinds from higher energy prices linked to the U.S.-Iran war and low water levels on the River Rhine during summer drought and heatwaves, which disrupted transport for sectors such as petroleum products.

The performance was a relief for Chancellor Friedrich Merz, whose popularity ratings have suffered as his plans to revive the manufacturing powerhouse moved slowly. A public-spending blitz on defense and infrastructure, unleashed after Merz won elections in 2025, is providing a major boost this year, according to multiple reports. Merz has also made fresh efforts to spur growth through social-welfare reforms and attempts to attract private capital.

“Germany is on track for its best growth performance since 2022,” ING economist Carsten Brzeski said, as reported by RTL Today. “Some would say there’s life in the old dog yet.”

German inflation slowed more than expected in October, falling to 2.8% from 3.3% in September, after the government introduced fuel subsidies to help motorists hit by higher costs triggered by the Iran war. Core inflation, which strips out volatile food and energy costs, dipped to 2.1% from 2.4%. However, Stephanie Schoenwald, an economist at German public lender KfW, warned of “growing price risks” ahead. “Gas and oil prices have risen significantly again in recent weeks — driven by ongoing conflicts and lower stock levels,” she said, as quoted by RTL Today.

**Mixed picture across the bloc**

France was the eurozone’s major laggard, with GDP contracting 0.1% in the third quarter. The economy is caught in a political deadlock over how to address an outsized budget deficit, weighing on business confidence. Prime Minister Sebastien Lecornu is in the midst of another parliamentary showdown over austerity, against a backdrop of social and political upheaval before presidential elections in 2027.

“France’s economy is at a standstill due to an unprecedented convergence of external and domestic shocks,” Finance Minister Roland Lescure said Friday, as reported by Bloomberg. “It needs to pick up. We need to restore confidence and for that having a budget is essential as that is what will allow us to bring down interest rates.”

French consumer prices jumped 3.8% in October, the highest since late 2023, according to Bloomberg.

Spain expanded 0.6%, driven by domestic demand and trade. The central bank has cited private consumption, job creation and population growth as drivers, and sees growth of 2.6% in 2026 and 2.2% in 2027, comfortably above the euro area’s pace. Spain has largely shaken off political instability, including Prime Minister Pedro Sanchez’s inability to pass a budget.

Italy’s economy stagnated in the third quarter. The government forecasts GDP will increase 1% in 2026, helping finance some of the tax cuts Prime Minister Giorgia Meloni has promised before elections next year. She has also asked Brussels for extra leeway of about €28 billion ($31.3 billion) for energy and defense outlays.

The Netherlands and Estonia also grew 0.6% in the quarter, according to ABC News.

The eurozone figure was distorted by an increase of 5.5% in Ireland, where figures are volatile because it hosts multinational tech and pharmaceutical companies whose global activities can influence the data. Excluding Ireland, eurozone growth was 0.2%.

**Resilience amid headwinds**

The overall outcome highlights the euro area’s broader sturdiness despite elevated inflation, the selloff in global bond yields, and the inflationary impact of the Iran war, as well as summer heat waves and droughts.

“Households and businesses have not pared back their spending due to the Iran war,” said Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics, as reported by ABC News. “All in all, the eurozone economy remains resilient amid geopolitical turmoil and a worsening inflationary environment,” wrote Paolo Grignani, senior economist at Oxford Economics, also cited by ABC News.

The European Central Bank left interest rates unchanged at its October meeting but flagged downside risks. With inflation in the eurozone at 3.8% — well above the 2% target — and Spain’s inflation at 4.9%, policymakers may hike rates for a third time at their December meeting. The jump in global bond yields is another drag, with France’s shaky fiscal and political position making it the region’s focal point.