Brussels: Europe's economy recorded zero growth in the final quarter of 2024, as Germany, the largest economy in the eurozone, continued to struggle, according to data released by Eurostat on Thursday.

The 20-nation eurozone's GDP remained flat, slowing from 0.4% growth in the third quarter. Business confidence was shaken by potential trade disruptions under the new administration of U.S. President Donald Trump, while consumers, still reeling from past inflation, remained cautious despite inflation cooling from its peak of 10.6% in October 2022.

Germany faced multiple economic headwinds, including the loss of cheap Russian energy, bureaucratic hurdles, and political instability in Berlin. The country’s economy contracted by 0.2% in the fourth quarter and shrank by the same amount for the entire year of 2024, marking its second consecutive year of decline.

The outlook for 2025 remains bleak, with the German government slashing its growth forecast from 1.1% to just 0.3% on Wednesday. The upcoming national election on Feb. 23, following the collapse of Chancellor Olaf Scholz’s coalition government, may bring clarity to the country’s economic direction.

Meanwhile, France is also grappling with political turmoil, leaving businesses and consumers uncertain about government spending, regulations, and taxes. France’s parliamentary deadlock means that a new election cannot take place before July, prolonging economic uncertainty and delaying action on its large budget deficit.

European businesses are also unsettled by Trump's potential tariff increases, which could hurt export-driven economies. Additionally, the declining demand for electric vehicles (EVs)—fueled by Germany’s decision to cancel EV purchase subsidies—has negatively impacted auto parts suppliers.

In response to economic concerns, the European Central Bank (ECB) is expected to cut interest rates later Thursday. While lower rates could boost growth by making credit more affordable, they also pose a risk of worsening inflation, which stood at 2.4% in December, driven by rising energy costs.

Consumer sentiment indicators suggest that Europeans remain wary of price increases, possibly due to Trump's trade policies or recent energy price hikes. Economists at Oxford Economics warn that this inflationary fear could further suppress household spending, compounding the economic slowdown.