Europe's Economy Grows Modestly, But Weaker Dollar Threatens Exports

• The European economy saw modest growth of 0.3% in Q4 2025, matching the previous quarter, despite earlier fears of recession due to US tariff threats.
• A deal capping US tariffs at 15% provided certainty for businesses, but a subsequent, withdrawn threat by Trump regarding Greenland briefly dented confidence.
• Lower inflation (1.9% in December) and rising wages have boosted consumer purchasing power and willingness to spend, supporting services sector growth.
• The euro's 14.4% rise against the dollar over the past year, reaching USD 1.19, makes European exports less competitive in key foreign markets.
• Germany, the eurozone's largest economy, grew 0.3% in Q4 2025, its best in three years, but faces challenges like high energy prices, labor shortages, and Chinese competition.

Why It Matters: Europe's modest economic growth is now challenged by a strong euro, threatening export competitiveness.