Europe Weekly

Portugal posted stronger-than-expected GDP growth of 2.5% year-on-year in the second quarter, giving the government ammunition to argue the economy is proving resilient. Yet persistent inflation and a deepening construction labor shortage are undermining the official optimism, exposing a fault line between headline performance and daily household reality. The debate is not just domestic: it mirror...

Spain's headline economic figures remain among the most resilient in the euro area, but a jump in inflation to 3.6% in July and soaring housing costs are undermining household confidence. The gap between macroeconomic performance and lived experience is sharpening a political fight over who benefits from growth. For policymakers in Madrid and Brussels alike, the tension between solid GDP numbers a...

Italy's industrial output fell 1.0% in June, reinforcing concerns that the country's economic recovery remains brittle even as the government insists its cautious fiscal strategy is working. A parallel coalition fight over taxing banks to fund public priorities has added instability to an already uncertain outlook. For the eurozone's third-largest economy, the stakes extend well beyond Rome.

Greece is confronting two overlapping crises that are testing both its public finances and its political credibility: an escalating wildfire season that officials now describe as a medium- and long-term fiscal risk, and a cost-of-living squeeze that official statistics have not fully resolved. The government argues it is managing both with discipline and foresight, but critics and households tell...

Sweden's governing right-wing bloc is closing the gap with the centre-left opposition ahead of the country's election, even as new economic data show inflation at near-zero levels and growth forecasts are being revised upward. The convergence of political momentum and improving economic conditions has sharpened the campaign debate over who deserves credit for Sweden's recovery. The stakes extend w...

Denmark is extending military service to eleven months and broadening conscription, marking one of the most significant shifts in its domestic social contract in decades. At the same time, the country's economy presents a study in contradictions: inflation has cooled to 1.8 percent, yet many households report little sense of relief. Together, these twin pressures are reshaping what it means to be...

Finland faces a defining political and economic test as its government pushes for spending restraint to contain a swelling public deficit, while the broader economy shows only tentative signs of recovery. GDP growth is forecast at below one percent for 2026, unemployment hovers near ten percent, and inflation, though moderate, has not returned costs to pre-crisis levels. The tension between fiscal...

Dublin is preparing an €8.5 billion budgetary package for 2027, triggering an intensifying political fight over whether robust tax revenues should fund expanded public services or provide relief to households squeezed by rising fuel costs and persistent inflation. With Ireland's HICP inflation holding at 3.1% in July 2026 and energy prices up 6.5% year on year, the gap between strong state finance...

Polish inflation accelerated to 3.0 percent in July, up from 2.5 percent in June, complicating the government's narrative that price pressures are firmly under control. Prime Minister Donald Tusk has responded by announcing a temporary fuel-price intervention for the final two weeks of August, including a reduced VAT rate and daily price caps. The measures offer short-term relief but have drawn ac...

Latvia is confronting two distinct but equally pressing challenges: an intensifying security standoff along its border with Belarus and a deepening financial crisis at state-controlled airline airBaltic. Both files carry significant consequences for public spending, civil liberties, and Latvia's standing within the European Union. The government's responses to each are being scrutinized by critics...

Lithuania's economy continues to grow, but elevated prices and a cooling labour market mean that recovery remains largely invisible to ordinary households. At the same time, the governing coalition, recently reconstituted with a 75-seat majority, is showing signs of internal strain that could complicate the country's ability to address those very pressures.

Estonia's ruling coalition has lost its parliamentary majority after two MPs defected, leaving the government to manage day-to-day affairs with exactly half of the Riigikogu's 101 seats. The political turbulence coincides with a mixed economic picture: GDP is growing again, but unemployment remains elevated and households have yet to feel a broad-based recovery. Together, the two developments pose...

Czech consumer prices rose 1.7 percent year on year in July, keeping inflation near the central bank's target but leaving underlying pressures intact. At the same time, Prague has announced a 36 billion crown increase in defense spending to meet NATO's 2 percent of GDP benchmark for the first time, igniting a sharp debate over fiscal priorities and national sovereignty. The two issues together def...

Slovakia is navigating two simultaneous crises that are straining its public finances, testing its democratic institutions, and complicating its relationship with the European Union. The government of Prime Minister Robert Fico is pushing through a painful fiscal consolidation package while simultaneously resisting EU pressure over Russia policy, drawing fire from citizens, employers, opposition p...

Hungary's new Tisza-led government faces a dual challenge: dismantling the institutional architecture of Viktor Orbán's illiberal state while managing an economy under serious fiscal strain. EU funds remain frozen amid unresolved rule-of-law disputes, compounding pressure on public finances and ordinary households. The coming months will determine whether Budapest can translate political transitio...

Austria is under mounting pressure to slash its budget deficit, which analysts estimate has risen to between 4.1 and 4.8 percent of GDP, well above the European Union's 3 percent ceiling. A new coalition government is still being forged, with fiscal discipline at the center of fractious negotiations. The stakes are high: failure to act risks triggering a formal EU excessive deficit procedure, whil...

A proposed 2026 budget triggered mass protests across Bulgaria, forcing the government into a humiliating retreat and laying bare a broader crisis of public trust. The episode intersects with persistent cost-of-living pressures that continue to squeeze households even as headline inflation eases. Together, the two crises cast a shadow over Bulgaria's aspirations to join the eurozone.

Slovenia has emerged as one of the European Union's most assertive voices on the Israel-Palestine conflict while simultaneously grappling with a fractious domestic debate over NATO commitments and defense spending. The twin crises are straining coalition unity, dividing public opinion, and raising questions about the small Alpine nation's strategic direction. For a country of just over two million...

Romania is navigating one of the European Union's most precarious fiscal positions, with the government pushing to narrow a large budget deficit while inflation, though falling, continues to erode household purchasing power. Political instability is complicating both challenges, drawing warnings from major credit rating agencies and unease from Brussels. The stakes are high: failure to consolidate...

Croatia's government is navigating a period of acute institutional stress, as a long-running feud between Prime Minister Andrej Plenković and President Zoran Milanović continues to disrupt policymaking. At the same time, households are still absorbing the effects of elevated prices despite a modest easing of inflation. Together, these pressures are shaping a country that feels, to many of its citi...

Germany's new coalition government has unveiled a sweeping reform package worth roughly 10 billion euros in annual income tax relief, alongside pension changes and deregulation measures, in a bid to restore the country's long-term competitiveness. The push comes as the German economy shows only tentative signs of recovery, with GDP growing a modest 0.2 percent in the second quarter while inflation...

France is trapped in a compounding cycle of political instability and fiscal strain, as a fragmented parliament makes it nearly impossible to pass durable budgets or sustain governments. The latest narrow survival of the Lecornu government against no-confidence motions has done little to restore confidence in Paris, and with growth forecast at just 0.3% for the third quarter, the economic stakes a...

Belgium is confronting a deepening fiscal deficit that exceeds European Union limits while simultaneously struggling to reassure major industrial investors rattled by protracted permit disputes and legal uncertainty. The two challenges are converging at a moment when growth is weak, interest costs are rising, and public patience is fraying. Together, they pose a serious test for Prime Minister Bar...

The Netherlands is facing a compounding political and economic crisis after its caretaker cabinet lost its foreign minister over Israel policy, widening an already dangerous governance vacuum. With GDP growth projected to slow and inflation remaining stubbornly above target, the instability is now casting a shadow over business investment and household finances. The situation underscores a broader...

Portugal is grappling with two simultaneous and intersecting crises: a bitter dispute over government-backed labour market reforms that has driven workers into the streets, and a dramatic political realignment that has elevated the far-right Chega party to the centre of national life. Together, these developments signal a country under significant social and institutional strain. The consequences...