The Future of the EU Economy: Structural Challenges and Recovery Strategies (2025–2027)

Certainly. Below is the full English version of the EU Economic Outlook Report (2025–2027), written in the voice of a senior economist, incorporating country-level analysis and stress test scenarios, along with source citations.

🧭 Executive Summary
Aggregate EU Economic Forecast (2025–2027)
🌍Country Analysis
Stress Test Scenarios (2025–2026)
Structural Challenges and Strategic Recommendations
Conclusion: Stability at the Cost of Potential
📚 References

🧭 Executive Summary

Between 2025 and 2027, the European Union enters a phase of cautious economic recovery. While pandemic-related imbalances are fading, the region continues to face three major structural risks: trade tensions (especially with the U.S.), geopolitical volatility (Middle East, Ukraine), and internal reform fatigue.

Three core economies—Germany, France, and Italy—are evolving unevenly. Germany faces structural stagnation, France experiences external headwinds, and Italy battles demographic and fiscal rigidity. This report delivers an integrated macroeconomic forecast, country-specific profiles, and scenario-based stress testing for policymakers and analysts.

Aggregate EU Economic Forecast (2025–2027)

Year	Real GDP Growth (EU)	Euro Area	Inflation (Headline)	Policy Interest Rate
2025	1.1% (EC) / 0.8% (IMF)	0.9% (ECB)	2.3%	3.75% → easing toward 2.5%
2026	1.5% (EC) / 1.2% (IMF)	1.1%	1.9%	Approaching neutral rate (1.9%)

Sources:

European Commission Spring Forecast 2025
ECB Staff Projections (June 2025)
IMF World Economic Outlook (April 2025)

🌍Country Analysis

Germany: Policy Pivot Amid Industrial Stagnation

Growth: 2025: ~0.0–0.1%, 2026: ~1.0%, 2027: ~1.3% (ifo Institute)
Headwinds: Structural decline in industrial output, high energy costs, low housing investment due to elevated mortgage rates
Policy Shift: Chancellor Merz unveiled a €500B “Future Investment Fund” targeting defense, semiconductors, and green tech

France: Stable Domestic Demand vs. Export Headwinds

Growth: 2025: 0.6%, 2026: 1.2% (INSEE)
Inflation: ~1.0% (harmonized)
Fiscal: Public deficit remains at 5.4% of GDP, limiting fiscal space for stimulus
Exports: Contributing negatively to growth (–0.7 ppt in 2025)

Italy: Mild Recovery with Long-Term Demographic Constraints

Growth: 2025: 0.6%, 2026: 0.8% (ISTAT, IMF)
Challenges: Fast-aging population, pension burden, high public debt (~137% of GDP)
Tailwinds: EU Recovery Fund investment, tourism rebound, digital infrastructure spending

Stress Test Scenarios (2025–2026)

Scenario	Risk Assumptions	EU-Wide GDP Impact (Cumulative)	Country-Level Impact (Δ GDP)	Policy Response
Baseline	Moderate trade tensions, stable oil	–0.2 to –0.5 ppt	DE: –0.3 / FR: –0.2 / IT: –0.1	Gradual rate cuts + selective stimulus
Adverse	U.S. tariffs + Mideast energy shock	–0.8 to –1.2 ppt	DE: –0.7 / FR: –0.5 / IT: –0.4	EU fiscal coordination, ECB easing
Positive	EU–U.S. trade truce, geopolitical easing	+0.5 to +0.8 ppt	DE: +0.4 / FR: +0.3 / IT: +0.2	Investment-led easing, labor reforms

Structural Challenges and Strategic Recommendations

Capital Market Integration

The EU’s Capital Markets Union must accelerate to channel savings into growth sectors (e.g., green/AI), especially for SMEs and startups.

Labor Mobility & Demographics

High-skill migration policy and intra-EU labor mobility are essential to offset aging populations and regional disparities.

Fiscal Reform & Joint Investment Facilities

Shared fiscal tools (e.g., for defense, R&D, climate) could complement national budgets and ensure EU-wide resilience.

Conclusion: Stability at the Cost of Potential

From 2025 to 2027, the EU is expected to return to a “low-growth, moderate inflation” equilibrium, supported by cautious monetary easing and stable labor markets. However, risks remain elevated and the recovery lacks dynamism without deeper structural reforms.

To convert stability into sustained prosperity, the EU must focus on: