Growth intact but under pressure: 3 calls for the eurozone in 2027

Eurozone growth should remain resilient at around 1% in 2027, while fiscal pressure, climate-policy delays and renewed sovereign stress create meaningful downside risks.

• Consumption is expected to start the year slowly as real wages remain under pressure and the labour market cools, while tighter fiscal policy and higher bond yields weigh on investment, especially residential construction.
• AI-related industries are expected to add around 0.1 percentage points to GDP growth, while normalising oil and gas prices should gradually reduce the drag from elevated energy costs.
• Germany’s fiscal stimulus is presented as an important growth driver for Germany and the wider eurozone, although the overall expansion is expected to remain modest.
• Rising housing and living costs could shift younger Europeans’ priorities away from climate activism, increasing political support for delays to climate targets and potentially postponing ETS2, which would reduce expected inflation in 2028.
• In a severe scenario, worsening political fragmentation in France and other highly indebted countries would push bond yields higher, trigger damaging debt spirals and force the ECB to cut policy rates to 0.5% and restart quantitative easing, while inflation would remain above 2%.

Takeaway: The base case is modest eurozone growth, but investors should monitor fiscal tightening, climate-policy delays and sovereign-market stress because the downside scenario would affect bond yields, bank shares, credit conditions and ECB policy.