The European Commission has delivered its Spring 2026 Economic Forecast on May 21, cutting expected growth across the EU and eurozone while raising inflation projections amid the ongoing energy shock from the Middle East conflict.
According to the document, the Commission now projects EU GDP growth of just 1.1 per cent in 2026 — down from the 1.4 per cent pencilled in by the Autumn 2025 Forecast — with the eurozone weaker still at 0.9 per cent, against the 1.2 per cent previously anticipated.
Inflation forecasts have been pushed upward, with headline Harmonised Index of Consumer Prices (HICP) inflation in the eurozone now seen averaging 3 per cent in 2026, well above the 1.9 per cent estimated six months ago. The EU-wide figure stands at 3.1 per cent — a full percentage point higher than the autumn projection.
The revisions are driven primarily by the war in the Middle East, which has pushed oil and gas prices higher, eroding household purchasing power and denting business confidence. Futures markets — used in the Commission’s technical assumptions — suggest oil and gas prices would remain about 20 per cent above pre-war levels through to the end of 2027.
The Commission noted weaker private consumption and investment, compounded by persistent structural problems: High energy costs, competitiveness losses (especially versus the US and China) and sluggish productivity growth.
Germany, France and Italy, the bloc’s three largest economies, are all expected to post particularly weak figures, while a handful of smaller eastern European countries continue to outperform. Germany’s GDP growth has been cut to 0.6 per cent in 2026, down from a previous estimate of 1.2 per cent, while France’s outlook has been trimmed to 0.8 per cent. Greece, by contrast, is set to grow by 1.8 per cent and remains above both the EU and eurozone averages.
Despite repeated claims from Brussels that the worst is behind, the Spring Forecast once again highlights the EU’s chronic inability to deliver robust growth.
Public debt remains elevated across much of the bloc, fiscal space is limited, and the much-vaunted green transition continues to impose costs without delivering the promised economic boost. The Commission expects the EU debt-to-GDP ratio to climb from 82.8 per cent at the end of 2025 to 85.3 per cent by end-2027, while the aggregate general government deficit widens from 3.1 to 3.6 per cent of GDP, partly on the back of rising defence spending.
The higher inflation outlook risks forcing the European Central Bank (ECB) to keep rates higher for longer, further weighing on indebted households and businesses.
Commissioner for Economy and Productivity Valdis Dombrovskis acknowledged the “challenging global environment” but stuck to the usual script of calling for more EU-level investment, deeper integration and accelerated green and digital transitions. He also tied the bloc’s recovery to simplifying regulation, completing the Single Market and stepping up support for Ukraine.
The Spring🌸 2026 #ECForecast projects weaker economic activity, as the conflict in the Middle East triggers a new energy shock that reignites inflation and shakes economic sentiment.
🔎See the details: https://t.co/MYEX4lxA0u pic.twitter.com/dpc8TNUY1J
— EU Economy & Finance (@ecfin) May 21, 2026
Private consumption is hit hard. Real disposable income growth has been revised down sharply, consumer confidence has deteriorated and precautionary saving is rising.
Investment is weakening noticeably, especially equipment investment, due to higher financing costs and uncertainty. The current account surplus is also projected to shrink from 2.4 per cent of GDP in 2025 to 1.6 per cent in 2027, as the eurozone loses ground in goods trade.
Independent economists described the forecast as another confirmation of Europe’s stagflationary trap.
Several analysts pointed out that the combination of weakening growth and rising inflation leaves the ECB in a difficult position, with limited room to cut rates without fuelling prices further. In April, the International Monetary Fund (IMF) raised its eurozone inflation forecast for 2026 from 1.9 per cent to 2.6 per cent — a figure the Commission has now overtaken with its own 3 per cent estimate.
German and French economists in particular expressed concern over the outlook for the bloc’s two largest economies, warning that persistent high energy costs and competitiveness losses against the US and China are becoming structural rather than cyclical problems.
Critics on the Conservative and right-wing benches of the European Parliament noted that the Commission’s standard call for more green investment and deeper integration is beginning to sound increasingly hollow given repeated downward revisions.
It is not surprising yet serious that the fiscal situation in the EU countries deteriorate further in the @EU_Commission spring forecast. Debt to GDP ratios are high, and further interest rate increases could make the situation worse (an increase in inflation is also expected)🧵
— Otto Brøns-Petersen (@OttoBrons) May 21, 2026
