The most favorable financial conditions continue to be felt in the eurozone, supporting consumption and investments. In addition, the commercial agreement between the European Union and the United States dissipates the uncertainty that weighed on the decisions of companies on loans and investments. The loosening of commercial tensions, together with the signals of cyclical recovery, will therefore mark the end of the cycle of rates cuts by the European Central Bank (ECB). The important British Schroders Asset Manager is convinced of this, whose vision of a “resilient” economy of the euro area is realizing.
Relzo forecasts
Schroders revised their growth forecasts for 2025 from 1% to 1.3%, in the wake of a performance higher than expected in the first half of the year. Although much of the positive surprise was determined by a significant increase in exports due to the anti -plot of duties, the internal demand also contributed positively to the growth of the eurozone.
The commercial agreement
The commercial agreement between the EU and the United States Porta relief: the duties seem destined to stabilize 15%. It would be an increase compared to 10%, but well below 30% that had been threatened. With Japan and South Korea that accept the same rate, European exporters maintain competitive equal in the US market. They could even gain ground if China were to face much higher duties.
In return, the EU has undertaken to purchase more US military equipment, to invest 600 billion dollars in the American economy and increase the imports of GNL from the United States.
Trump claims an increase of 250 billion dollars a year in energy imports, a significant leap compared to the current 65 billion. However, with long -term energy contracts in force and private companies that guide energy imports, this promise could be more a political move than an economic reality.
The commitments resume past agreements: during the first term of Trump, China had committed to spending another 200 billion dollars in US agricultural products, a promise that has never materialized. However, the commercial agreement contributes to reducing political uncertainty without causing serious disturbances to the Economy of the Eurozone. And while trade with the United States has now normalized after an initial acceleration, the anticipatory indicators continue to report a further improvement.
The financial conditions
In the meantime, the most favorable financial conditions are stimulating the demand for mortgage loans and also the demand for credit by companies has improved, although with caution.
“As commercial tensions attempt each other, a further increase in loans is likely and we remain optimistic about the growth prospects for next year”
Irene Lauro says, Schroders’ Eurozone Economist. In fact, the expert provides that the strongest tax and monetary stimuli will lead to a 2.0% GDP growth on an annual basis for the Eurozone and 2.2% for Germany. The German government is carrying out its commitment to increase the expense for infrastructure and defense, with the budget law which should be approved by both chambers of Parliament in September.
“We believe that the markets have not yet fully discounted the impact of this significant change in German tax policy and our growth forecasts for 2026 are higher than consent estimates. With the uncertainty on the bodies that have now passed, the next focal point for the markets will probably be the evolution of the tax landscape”
Lauro concludes.
Inflation and ECB
Schroders’ forecasts on inflation remain unchanged. It provides that the drop in oil prices and the strengthening of the euro will bring the total inflation from 2.1% on an annual basis in 2025 to 1.7% in 2026. The commercial agreement eliminates part of the uncertainty on the prospects of inflation, making a retaliation unlikely by the EU and making the disinflation agreement for the Eurozone.
“Although the inflation is destined to descend below the 2% objective set by the ECB, we do not foresee further rates cuts by the ECB on the forecast horizon. The work markets have undergone a slowdown, but remain rigid, supporting the pressures on internal prices. With the strengthening of the favorable winds on the tax front, the ECB can pass from the urgency to patience”
Lauro says.
However, the political risks in France will remain high in view of the September trusted vote. If the government falls, President Macron will probably address early elections, adding uncertainty and pressure on French assets, in particular on the obligations.
