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The Eurozone economy has faced challenges from political instability, rising geopolitical tensions and uncertainty over proposed tariffs from the Trump administration. The region still faces risks, as trade wars and increased defense spending could drive inflation, while both domestic and trade policy uncertainty remain high. However, conditions remain favorable for Eurozone GDP growth to regain momentum in the coming period.
According to Reuters, after Goldman Sachs predicted an improvement in the EU economy, J.P. Morgan projected an uptick in Eurozone economic growth for 2025, driven by Germany's fiscal loosening reforms. J.P. Morgan anticipates a 0.1 percentage point rise in growth to 0.8% for 2025, followed by 1.2% growth in 2026, an increase of 0.3 percentage points.
Unpacking EU's Economic Growth
Per the European Central Bank (ECB), real GDP growth for the single currency bloc is projected to gain momentum in the medium term, driven by rising consumption, improving investment and robust foreign demand.
Additionally, the central bank also expects private consumption to rebound, driven by strong growth in labor compensation and rising real disposable income. Household spending and business investment are also expected to recover, driven by gradually improving demand and easing financing conditions. Business investment is projected to see modest growth in 2025-26 before gaining stronger momentum in 2027.
Investor confidence in the Eurozone surged in March, with economic expectations hitting their highest level since July 2021, according to a survey, per Reuters. Germany's plans for new debt played a key role in driving this positive sentiment.
This boost in investor morale, in contrast to the sharp decline in current conditions and expectations in the United States, further reinforces the optimistic outlook for the region.
Inflation Relief Ahead?
According to European Central Bank policymaker Mario Centeno, as quoted on Reuters, Eurozone inflation is expected to fall sustainably to its 2% medium-term target, following a steady and stable path as the region moves toward monetary policy normalization. However, the region remains highly vulnerable to upcoming U.S. tariffs on exports.
In February, Eurozone inflation fell to 2.4% for the first time in four months, reinforcing the ECB’s confidence in cutting borrowing costs, according to Financial Times. Services inflation, a key indicator of domestic price pressures, declined from 3.9% to 3.7%, its lowest level since April 2024.
Per the estimates of ECB, Headline HICP inflation is expected to ease slightly in 2025 before gradually declining and stabilizing around the ECB’s 2.0% target from Q1 2026.
Can Defense Spending Power EU’s Economic Growth?
As revealed by European Commission president Ursula von der Leyen while introducing the ReArm Europe plan, as quoted on Fortune, the EU has announced an $867 billion increase in defense spending. Europe is preparing to strengthen its military capabilities and significantly ramp up defense spending to take greater long-term responsibility for its own security.
Experts suggest that the planned increase in defense spending could drive economic growth in Europe. According to Ilsetzki’s analysis finds, as quoted on Statista, the proposed spending boost could contribute between 0.9% and 1.5% to GDP growth, a significant uplift from the bloc’s modest 0.9% GDP growth in 2024.
A Promising Future But Storm Clouds Linger
The outlook for the European economy is closely linked to global markets, as many companies depend significantly on international revenues. With growing uncertainties in its key trading partners like the United States and China, European markets could face challenges in 2025.
The White House confirmed on Tuesday that a 25% tariff on steel and aluminum imports to the United States from all countries will take effect at midnight on March 11. According to Reuters, a key gauge of Eurozone equity volatility surged to a seven-month high, as European stocks fell further on Tuesday on fresh tariff news.
In response, the EU announced counter-tariffs on $28 billion worth of U.S. goods starting April, escalating the global trade dispute, per the European Commission, as quoted on Yahoo Finance.
ETFs to Consider
Volatility from an uncertain global economic and trade landscape continues to cast a shadow over the EU. However, the positives outweigh the negatives in this case. Robust domestic demand, resilient labor markets and recovering investment provide the foundation for steady growth.
While risks such as trade tensions and geopolitical instability persist, the EU has the potential to navigate these uncertainties and sustain its economic momentum.
Below, we highlight a few ETFs with exposure to the Eurozone, for investors to increase their exposure in Europe and capitalize from optimistic outlook of the single currency bloc.
Vanguard FTSE Europe ETF has gathered an asset base of $20.99 billion and charges an annual fee of 0.06%. The fund has a one-month average trading volume of about 4.99 million shares.
VGK stands out as the most suitable and attractive fund among the options mentioned, offering strong liquidity and competitive fees. This makes it a solid choice for long-term investors, while being a viable option for active trading strategies.
Vanguard FTSE Europe ETF has gained 4.23% over the past month and 7.73% over the past three months.
iShares MSCI Eurozone ETF has gathered an asset base of $8.67 billion and charges an annual fee of 0.51%. The fund has one-month average trading volume of about 2.81 million shares.
iShares MSCI Eurozone ETF has gained 4.20% over the past month and 10.79% over the past three months.
JPMorgan BetaBuilders Europe ETF has gathered an asset base of $ 4.21 billion and charges an annual fee of 0.09%. The fund has one-month average trading volume of about 716,000 shares.
JPMorgan BetaBuilders Europe ETF has gained 4.58% over the past year and 8.31% over the past three months.
iShares Core MSCI Europe ETF has gathered an asset base of $4.74 billion and charges an annual fee of 0.09%. The fund has a one-month average trading volume of about 1.14 million shares.
iShares Core MSCI Europe ETF has gained 4.25% over the past month and 7.73% over the past three months.
SPDR EURO STOXX 50 ETF has gathered an asset base of $4.35 billion and charges an annual fee of 0.29%. The fund has a one-month average trading volume of about 2.93 million shares.
SPDR EURO STOXX 50 ETF has gained 3.48% over the past month and 12.21% over the past three months.
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Growth or Chaos? Navigate EU's Future With ETFs
The Eurozone economy has faced challenges from political instability, rising geopolitical tensions and uncertainty over proposed tariffs from the Trump administration. The region still faces risks, as trade wars and increased defense spending could drive inflation, while both domestic and trade policy uncertainty remain high. However, conditions remain favorable for Eurozone GDP growth to regain momentum in the coming period.
According to Reuters, after Goldman Sachs predicted an improvement in the EU economy, J.P. Morgan projected an uptick in Eurozone economic growth for 2025, driven by Germany's fiscal loosening reforms. J.P. Morgan anticipates a 0.1 percentage point rise in growth to 0.8% for 2025, followed by 1.2% growth in 2026, an increase of 0.3 percentage points.
Unpacking EU's Economic Growth
Per the European Central Bank (ECB), real GDP growth for the single currency bloc is projected to gain momentum in the medium term, driven by rising consumption, improving investment and robust foreign demand.
Additionally, the central bank also expects private consumption to rebound, driven by strong growth in labor compensation and rising real disposable income. Household spending and business investment are also expected to recover, driven by gradually improving demand and easing financing conditions. Business investment is projected to see modest growth in 2025-26 before gaining stronger momentum in 2027.
Investor confidence in the Eurozone surged in March, with economic expectations hitting their highest level since July 2021, according to a survey, per Reuters. Germany's plans for new debt played a key role in driving this positive sentiment.
This boost in investor morale, in contrast to the sharp decline in current conditions and expectations in the United States, further reinforces the optimistic outlook for the region.
Inflation Relief Ahead?
According to European Central Bank policymaker Mario Centeno, as quoted on Reuters, Eurozone inflation is expected to fall sustainably to its 2% medium-term target, following a steady and stable path as the region moves toward monetary policy normalization. However, the region remains highly vulnerable to upcoming U.S. tariffs on exports.
In February, Eurozone inflation fell to 2.4% for the first time in four months, reinforcing the ECB’s confidence in cutting borrowing costs, according to Financial Times. Services inflation, a key indicator of domestic price pressures, declined from 3.9% to 3.7%, its lowest level since April 2024.
Per the estimates of ECB, Headline HICP inflation is expected to ease slightly in 2025 before gradually declining and stabilizing around the ECB’s 2.0% target from Q1 2026.
Can Defense Spending Power EU’s Economic Growth?
As revealed by European Commission president Ursula von der Leyen while introducing the ReArm Europe plan, as quoted on Fortune, the EU has announced an $867 billion increase in defense spending. Europe is preparing to strengthen its military capabilities and significantly ramp up defense spending to take greater long-term responsibility for its own security.
Experts suggest that the planned increase in defense spending could drive economic growth in Europe. According to Ilsetzki’s analysis finds, as quoted on Statista, the proposed spending boost could contribute between 0.9% and 1.5% to GDP growth, a significant uplift from the bloc’s modest 0.9% GDP growth in 2024.
A Promising Future But Storm Clouds Linger
The outlook for the European economy is closely linked to global markets, as many companies depend significantly on international revenues. With growing uncertainties in its key trading partners like the United States and China, European markets could face challenges in 2025.
The White House confirmed on Tuesday that a 25% tariff on steel and aluminum imports to the United States from all countries will take effect at midnight on March 11. According to Reuters, a key gauge of Eurozone equity volatility surged to a seven-month high, as European stocks fell further on Tuesday on fresh tariff news.
In response, the EU announced counter-tariffs on $28 billion worth of U.S. goods starting April, escalating the global trade dispute, per the European Commission, as quoted on Yahoo Finance.
ETFs to Consider
Volatility from an uncertain global economic and trade landscape continues to cast a shadow over the EU. However, the positives outweigh the negatives in this case. Robust domestic demand, resilient labor markets and recovering investment provide the foundation for steady growth.
While risks such as trade tensions and geopolitical instability persist, the EU has the potential to navigate these uncertainties and sustain its economic momentum.
Below, we highlight a few ETFs with exposure to the Eurozone, for investors to increase their exposure in Europe and capitalize from optimistic outlook of the single currency bloc.
Vanguard FTSE Europe ETF (VGK - Free Report)
Vanguard FTSE Europe ETF has gathered an asset base of $20.99 billion and charges an annual fee of 0.06%. The fund has a one-month average trading volume of about 4.99 million shares.
VGK stands out as the most suitable and attractive fund among the options mentioned, offering strong liquidity and competitive fees. This makes it a solid choice for long-term investors, while being a viable option for active trading strategies.
Vanguard FTSE Europe ETF has gained 4.23% over the past month and 7.73% over the past three months.
iShares MSCI Eurozone ETF (EZU - Free Report)
iShares MSCI Eurozone ETF has gathered an asset base of $8.67 billion and charges an annual fee of 0.51%. The fund has one-month average trading volume of about 2.81 million shares.
iShares MSCI Eurozone ETF has gained 4.20% over the past month and 10.79% over the past three months.
JPMorgan BetaBuilders Europe ETF (BBEU - Free Report)
JPMorgan BetaBuilders Europe ETF has gathered an asset base of $ 4.21 billion and charges an annual fee of 0.09%. The fund has one-month average trading volume of about 716,000 shares.
JPMorgan BetaBuilders Europe ETF has gained 4.58% over the past year and 8.31% over the past three months.
iShares Core MSCI Europe ETF (IEUR - Free Report)
iShares Core MSCI Europe ETF has gathered an asset base of $4.74 billion and charges an annual fee of 0.09%. The fund has a one-month average trading volume of about 1.14 million shares.
iShares Core MSCI Europe ETF has gained 4.25% over the past month and 7.73% over the past three months.
SPDR EURO STOXX 50 ETF (FEZ - Free Report)
SPDR EURO STOXX 50 ETF has gathered an asset base of $4.35 billion and charges an annual fee of 0.29%. The fund has a one-month average trading volume of about 2.93 million shares.
SPDR EURO STOXX 50 ETF has gained 3.48% over the past month and 12.21% over the past three months.