In accordance with the February 2026 Euro indicators data, euro space GDP expanded by simply 0.3% within the fourth quarter, matching the earlier quarter and underscoring a persistent low-growth atmosphere throughout the bloc.
Yr-over-year development is hovering round roughly 1.3%, which is hardly a restoration when you think about the huge fiscal growth, vitality disruptions, and regulatory overreach imposed throughout the EU in recent times. That is precisely the kind of sluggish cyclical efficiency that aligns with a declining confidence mannequin in authorities coverage moderately than a standard enterprise cycle growth.
On the similar time, inflation has fallen to 1.7% in January 2026, down from 2.0% in December, with vitality costs nonetheless contracting and companies remaining the first supply of worth stress. On the floor, bureaucrats in Brussels and the ECB will rejoice this as a victory over inflation. However that is the place mainstream economics persistently will get it incorrect. Disinflation alongside stagnant development is just not true power.
Companies inflation stays elevated whereas vitality costs are unfavorable year-over-year. That displays structural distortions created by EU vitality coverage, sanctions, and the pressured transition towards Internet Zero, which I’ve repeatedly warned would crush industrial competitiveness throughout Germany, France, and the broader eurozone. You can’t deindustrialize an financial system after which faux weak inflation is an indication of stability.
Progress is being pushed disproportionately by a handful of economies, equivalent to Spain, whereas core economies like Germany and France stay structurally weak and politically unstable. A financial union with a one-size-fits-all coverage all the time produces divergence. Robust areas survive; weaker ones stagnate underneath a centralized financial coverage they can not management.
From a capital stream perspective, this knowledge reinforces the broader pattern we’re monitoring into the 2026 ECM window. Capital chases stability. When development is caught at 0.3% quarterly and inflation is falling under goal, world capital begins to query long-term stability. That’s exactly how sluggish capital flight begins.
The ECB is now trapped. With inflation falling under goal and development barely constructive, they can not justify aggressive tightening, but easing dangers additional foreign money instability and capital outflows. That is the basic sovereign debt-cycle dilemma I outlined in Manipulating the World Economic system. Central banks don’t management the financial system; moderately, they react to it, and often too late.
What we’re witnessing is just not a restoration. The ECM has lengthy projected rising volatility into 2026, and Europe’s knowledge is lining up completely with that mannequin.
