The unexpected element lies in the (highly likely) lack of surprises. The suspense surrounding the outcome of the FOMC meeting on 28-29 October and the ECB meeting on 30 October is, in reality, quite limited: a further 25 bp cut by the Fed and a continuation of the stance for the ECB are expected. In doing so, by narrowing the gap between policy rates and the extent of restriction in US monetary policy, the Fed's stance is aligning more closely with that of the ECB rather than moving away from it. Such a simultaneous lack of suspense for both central banks is uncommon, especially given the overall economic environment, which remains fraught with uncertainty.
The public debt ratio is rising again in the Eurozone, while its equivalent for non-financial companies (NFCs) is decreasing. The October 2025 Fiscal Monitor of the IMF forecasts that the public debt ratio will increase by 5 points of GDP in the euro area by 2030 compared to its 2024 level (87.2% of GDP, compared to 83.6% in 2019). Against this background, the debt of non-financial companies reached its lowest level since Q3 2007 in Q2 2025, at 66.6% of GDP.
Low in fat, high in fibre, with a large proportion of fruit and vegetables: in terms of health, the virtues of the Mediterranean diet are well-established, but what about in economic terms? For the past decade, the countries of the Economic and Monetary Union (EMU) forming the Mediterranean ‘arc’ (France, Italy, Spain, Greece) have been following a similar diet, aiming to improve their competitiveness. We take a look at this in our Chart of the week.
Modernity sometimes conceals, under new guises, a return to old precepts: a currency backed 100% by the safest assets, bank deposits guaranteed by tangible reserves, the search for unfailing financial stability. Stablecoins (digital tokens backed by highly safe and liquid assets) are part of this logic. However, in our modern economies, banks only keep a small fraction of deposits in reserve with the Central Bank: this is the principle of "fractional reserves" which gives them the ability to create money (the remaining deposits can be allocated to credit). Beyond the intellectual interest that they attract, stablecoins raise a broader question: if their use were to become widespread, would they not risk making it more difficult to finance the economy?
In August 2025, the decrease in market rates (Euribor, swap, etc.), which began in October 2023, had been passed on in full to the rates on new bank loans to corporations and households in the Eurozone. Banks generally tend to adjust the pricing of new loans to the cost of their resources with comparable maturities. Swap rates are good reference rates in this respect, as they provide a reliable approximation of what the market considers to be the expected path of short-term rates for a wide range of horizons.
The recovery in PMI indices continues despite a decline in industry. In September 2025, the composite PMI reached its highest level since May 2024 (51.2), an improvement attributable to services (51.4). However, the manufacturing index, which had been recovering sharply since the beginning of the year, declined in September (-1.2 points to 49.5). Industrial production rose by 0.3% m/m in July. The economic sentiment index stabilised in Q3.
Rates on new investment loans (irf>5 years) to non-financial corporations in the Eurozone fell very slightly in July 2025 for the second consecutive month. At 3.58%, however, they remained close to their June 2025 level. Rates on new treasury loans (floating rate and irf<3 months) to NFCs fell slightly more sharply to 3.31%. Conversely, rates on new loans to households for house purchase and consumption rose just as modestly (by +1 bp and +6 bp m/m, respectively). They stood at 3.30% and 7.41%, respectively.
The decline in the IFO index in September does not impede the upward trend that began in early 2025. The relative weakness in September particularly affected services and retail trade. However, there has been a clear improvement since the beginning of the year in German industry, construction and wholesale trade. This momentum has not yet spread to the rest of the economy, whilst awaiting the effective implementation of investment plans, with a ramp-up expected in Q4.
In France, the improvement in certain sectors is not spreading to others. The composite business climate has been stable for five months, at 96. Several sectors benefited from an improvement in Q2, including aeronautics, information and communication, and construction (to a lesser extent). These sectors continue to outperform in Q3, but without this spreading to other sectors; they should therefore continue to support growth in Q3. However, growth is vulnerable to a slowdown in these sectors in the absence of other drivers.
In September, the economic sentiment index remained below its long-term average, held back by industry with a production index still in negative territory (-17.4) and production forecasts declining (-0.9). This contrasts with the rise in Italian's industrial production. In services, sentiment is improving (+2.5; +0.2 pts) but activity is struggling to take off. However, expectations for demand in the coming months are rising (6.3, the highest since April 2024; +4.6 pts).
In Spain, business confidence strengthened in September and remains well above its long-term average. In industry, the index remains in contraction territory but is improving (-4.7; +1.1 pts m/m). Production expectations for the coming months have risen significantly since spring (3.2 vs. -0.4 on average in Q2), although they are down compared with last month (-1.1 pts).
In its fight against global warming, the European Union is about to take an important step: the launch of the operational phase of its Carbon Border Adjustment Mechanism (CBAM). How will it work? Who will be affected? What will be the economic consequences? These questions (and a few others) are addressed below.
Since the cessation of most Russian gas supplies, reducing Europe's energy vulnerability, and thus improving its economic security, has been a key issue for European decision-makers. However, recent pressure from the United States on Europe to increase its purchases of US hydrocarbons could raise fears of a new significant dependence on US liquefied natural gas (LNG)..
The IFO business climate index fell in September to 87.7 from 88.9 in August (-1.2 points month-on-month, a monthly change close to the historical average monthly change of 1.1 points in absolute terms). This deterioration, after eight consecutive months of growth (84.8 in December 2024), particularly affected services. The situation in industry remained stable and more favourable than at the end of 2024, with a gain of around ten points for both current activity and the outlook.
Why might the Fed cut rates despite stubborn inflation? What card will the ECB play in the face of a fragile European recovery?
After historic increases, lending rates for households and businesses are calming down. Should we expect a return to normal?
Despite the announcement of the US-EU trade deal at the end of July, the short-term growth outlook for the Eurozone remains uncertain. This is well illustrated by the fact that professional economists, whose forecasts usually converge towards the end of the year, are currently continuing to disagree to a large extent about this year’s euro area growth.
Growth in the Eurozone has so far proved fairly resilient to shocks (accompanied in particular by an acceleration in new lending against a backdrop of falling interest rates) and should gradually accelerate. Exports will continue to be weakened by Chinese competition and US protectionism. However, the foreseeable rebound in German growth will benefit economic activity in the Eurozone as a whole. Moreover, the buoyant labour market is supporting household purchasing power, without generating inflationary pressures, giving the ECB visibility and room for manoeuvre if necessary.
The resumption of German growth has been hampered by US tariffs. However, the outlook continues to brighten thanks to the government's strategy, which is structured around a vast programme of public investment and incentives for business investment. Beyond the anticipated economic rebound, the structural recovery of growth will depend on the country's ability to control its value chains and reposition itself in global trade amid increased competition. Inflation is expected to continue to decline. Despite unfavourable developments in industry, unemployment remains contained, and labour market tensions could quickly resurface. Public debt is expected to grow as a result of the widening budget deficit and rising interest rates (the effects of which will be felt by other Eurozone members).
France recorded a rebound in growth to 0.3% q/q in Q2 2025 after a more unfavorable period marked by political uncertainty. Although this uncertainty persists, the rebound in growth should be sustained. Unlike the political situation, other aspects of the French economy have improved (agricultural and aeronautical production, interest rates in the private sector, investment) or are on track to do so (German demand). The stabilization of the labor market and the sharp increase in business creation already confirm the rebound.
In Q2 2025, Italy's real GDP fell by -0.1% q/q. This decline marks the end of seven consecutive quarters of growth. Investment rose (+1% q/q) but could not compensate for the fall in net exports, while industrial production slipped 1.1% y/y. Despite the challenges, the latest turnover data and qualitative indicators show an increase in activity and new orders, as well as improved business confidence. The labour market remains robust: employment held steady at 24.2 million and the unemployment rate kept falling. Inflation stayed low at 1.7%, enabling purchasing power to rebound (+0.9% q/q)
After a strong first half of the year, Spanish growth should remain higher than that of its European neighbours in 2025 and 2026. Domestic demand is likely to remain the main driver, primarily supported by job creation, while the contribution of foreign trade is expected to become slightly negative. The budget deficit and the debt-to-GDP ratio should continue to benefit from significant nominal growth, which is nevertheless expected to slow gradually. Weak productivity could, however, hold back potential growth in the longer term, particularly as the available labour force begins to shrink.
Belgian growth fluctuated in the first half of this year, with a strong Q1 followed by a slowdown in Q2. Nevertheless, our nowcast for Q3 points to growth of 0.3% q/q, with renewed confidence among households and businesses. Export growth was subdued, hit by tariffs and the related uncertainty. However, the wage catch-up in neighbouring countries should improve Belgian’s competitiveness (wages are now rising faster than inflation in comparable European countries). House prices continue to rise, but the low number of new homes makes them less affordable. The public debt ratio is increasing by 2 percentage points per year and increased commitments to NATO are widening the deficit. The government has no choice but to take difficult decisions to reduce it.
The French economy is entering a new budgetary cycle that is likely to be as complicated as the previous one. However, the economy appears to be more robust than in 2024. Firstly, the productive sector is in better shape today in several key areas (notably aeronautics and agriculture), which is reflected in the growth figures. Secondly, the shadow of political uncertainty has not undermined the strengths of the French economy: business creation, the labour market, a balanced current account, the transmission of ECB rate cuts to the private sector and the improvement in private investment
Broadly speaking, the economic outlook for the global economy at the beginning of September remains largely unchanged from that at the end of July: namely, an economy that, overall, continues to withstand the double blow of US tariffs and uncertainty. Our current scenario expects an average annual growth of 1.6% in the United States in 2025, followed by 1.5% in 2026 and 1.3% in the Eurozone for both years (after 2.8% and 0.8% respectively in 2024). So, while the pace of US growth is expected to remain higher than that of the Eurozone, the outlook is for a slowdown across the Atlantic. On the Eurozone side, however, signs of recovery, albeit tentative, tend to predominate, to the point where the Fed is ready to resume its rate cuts and the ECB is ready to halt them
