Sluggish growth in Europe
The AIECE Association of European Economic Research Institutes (of which the Kiel Institute is a member) expects sluggish growth in Europe amid high policy uncertainty. It has published its bi-annual General Report, following the Spring 2025 Meeting held in Oslo hosted by Statistics Norway.
On average, AIECE member institutes forecast EU GDP to grow by of 1.2% in 2025 and 1.5% in 2026. The forecast for euro area GDP growth is 1.0% in 2025 and 1,3% for 2026. For this year, these forecasts are slightly more optimistic than those presented in the European Commission Spring 2025 forecast, the OECD's March 2025 Interim Report and the IMF's Spring 2025 World Economic Outlook. The range of individual AIECE institute’s forecasts is, however, wide, spanning from 0.25% to 1.4% for euro area growth in 2025 and 0.5% to 1.7% in 2026.
Read full AIECE General Report (.pdf)
A central feature of the current economic situation is substantial uncertainty driven by geopolitical conflicts and unpredictable US trade policies. Concerning proposed reactions to US trade policy, two thirds of responding AIECE institutes supported retaliation against US tariffs on cars, while an even larger majority opposed a strategy to comply with US demands and urge consumers and firms to buy more US goods. At the same time, nearly half of the respondents support the idea that the EU should join initiatives to reduce the dominance of the US dollar.
In light of fiscal expansion plans in Germany and other EU countries, the member institutes were asked whether the EU's fiscal rules should be relaxed in order to answer to pressing policy challenges. It turns out that a majority of respondents oppose loosening fiscal rules for the purpose of increasing spending on climate protection, while opinions are divided on whether the rules should be relaxed to allow for greater defense spending.
The Spring 2025 AIECE General Report, authored by Katalin Nagy and Péter Vakhal of Kopint-Tárki Institute (Hungary), offers a comprehensive macroeconomic outlook for the European economy. It also includes detailed assessments from member institutes on key cyclical, policy, and structural issues.
Link to the full documents of the AIECE Spring Meeting:
aiece.org/general-meetings
About the AIECE
The AIECE Association of European Economic Research Institutes, founded in 1957, brings together 40 member institutes and observers from 19 countries and 5 international organizations. The association convenes twice a year to exchange views on the economic outlook for European economies and discuss economic policy as well as structural economic developments. The AIECE serves as one of the few independent forums where the economic prospects of Europe are regularly and systematically assessed. More information is available at: https://www.aiece.org/about-aiece
