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Data released on February 3rd by Eurostat, the European Union's statistical office, showed that inflation in the eurozone continued to rebound. This means that the EU now faces the twin pressures of stagnant growth and inflation. Some analysts pointed out that the EU's plan to improve competitiveness needs time and money, and the threat of US tariffs has not dissipated, which adds to the uncertainty of the EU's growth prospects.

According to preliminary statistics released by Eurostat on February 3 local time, inflation in the euro area was 2.5% on an annual basis in January, up from 2.4% in December 2024 and the fourth consecutive month of inflation increases since October 2024.

In terms of specific categories, the euro area in January service prices rose 3.9 percent year-on-year, food and tobacco and alcohol prices rose 2.3 percent year-on-year, non-energy industrial product prices rose 0.5 percent, and energy prices rose 1.8 percent. Core inflation, which strips out energy, food and alcohol and tobacco prices, is 2.7 per cent.

According to data released by Eurostat at the end of January, the eurozone economy grew at zero quarter-on-quarter in the fourth quarter of 2024, adjusted for seasonal and working days, with Germany and France declining by 0.2% and 0.1% quarter-on-quarter, respectively. For the whole of 2024, the eurozone economy grew by 0.7% and the EU by 0.8%. Germany's gross domestic product (GDP) fell 0.2% in 2024, the second consecutive year of negative growth. France's GDP will grow by 1.1% in 2024.

European Central Bank President Christine Lagarde has previously acknowledged that the European economy has "stalled" and "will remain weak in the near term." However, the ECB believes that the current high level of inflation in the euro zone is due to the lag of inflation-induced wage and price adjustments in some sectors. The ECB expects eurozone inflation to return to its 2% target by 2025.

Some analysts pointed out that from the data released by the European Union's statistical office, the rebound in energy prices is one of the reasons for the rise in inflation in the eurozone in January. Since the beginning of the winter, the price of natural gas in the European Union has been high, and Ukraine has stopped the transit of Russian gas since January 1 this year, which has plunged some countries in Eastern Europe into an energy shortage crisis.

Looking back at 2024, the EU economy as a whole showed a high opening trend. In the first three quarters of 2024, the EU economy has achieved quarter-on-quarter growth, inflation has continued to fall, and it seems to be on the verge of completely exiting the energy crisis. However, after entering the fourth quarter, the EU economy showed signs of weak growth, and relevant institutions have lowered their expectations for the EU economy. The European Central Bank currently expects the eurozone economy to grow by 1.1% in 2025, while the German government expects the German economy to grow by just 0.3% in 2025.

In order to stimulate economic growth, the European Central Bank has started a cycle of interest rate cuts since June 2024. On January 30 this year, the European Central Bank lowered the three key interest rates by 25 basis points, the deposit mechanism rate, the main refinancing rate and the marginal lending rate to 2.75%, 2.90% and 3.15% respectively. The rate cut is intended to encourage lending and investment and stimulate consumption, but consumer confidence in many European countries remains low due to high living costs and pessimistic economic expectations, and household savings rates are high.

Some analysts point out that after basically overcoming the inflation problem, the European Union is effectively returning to a dilemma it has faced before: the lack of new growth poles. Take Germany as an example, the German manufacturing industry was once brilliant, but under the energy crisis, many companies had to lay off employees or go bankrupt. In the competition for new industries, Europe does not have an advantage.

This is why the EU has repeatedly stressed the need to strengthen competitiveness in 2024. On January 29, the European Commission published its Competitiveness Guidelines, acknowledging that Europe is lagging behind other major economies in competitiveness due to gaps in productivity growth. To this end, the EU proposed a series of improvement measures in this document, such as simplifying administrative regulation, enhancing financing capacity, and promoting skills upgrading and employment.

However, upgrading the innovation capacity and competitiveness of the economy requires substantial investment, and fostering new industries also takes time. But when it comes to investment, EU member states are not unanimous. Some countries are under severe fiscal pressure, with the cost of living and fiscal austerity a priority, and it is uncertain whether enough money will be available to invest in new industries. The EU is also facing the problem of uneven development, which may affect the Union's unified action. For example, some countries still oppose EU energy sanctions against Russia, arguing that they hurt the EU economy.

If competitiveness is a long-term issue, the EU's biggest immediate challenge should be the threat of US tariffs. US President Donald Trump said on February 2 that he planned to impose tariffs on EU products soon. Many European leaders responded strongly to Trump's remarks, saying that the EU will unite to meet the challenge and is ready to take countermeasures. Still, the EU wants to work with the United States to resolve the issue.

Analysts believe that the United States is one of the most important export markets for Europe, and there is widespread concern in Europe that the United States will impose tariffs on the European economy. In this context, European leaders are hoping to toughen their stance to gain leeway on tariffs, and the negotiations between the United States and the European Union will affect the European economic outlook. It is worth noting that in addition to exports, the EU's future development of high-tech industries and competitiveness may face pressure and obstruction from the United States. How to take the initiative in the game with the United States is a question that the EU needs to think about.