Brussels has revised its economic growth forecasts for the Eurozone, lowering expectations by four tenths to 0.9% for this year due to the volatility caused by ongoing tariff wars.

Despite this broader downturn, Spain's economy is projected to grow at 2.6% in 2025, establishing it as the fastest-growing major economy among Eurozone countries.

This figure aligns with the Spanish government's own forecasts and exceeds previous predictions made by the European Commission, which anticipated a growth rate of 2.3%.

Valdis Dombrovskis, the European Commissioner for Economy, acknowledged in a press conference that elevated uncertainty and trade tensions are adversely affecting the growth of the EU, but stressed that the economic fundamentals within the bloc remain strong.

According to the recent data, Spain's economic resilience can largely be attributed to increasing consumer spending, real household income growth, and a robust labor market, which have shown positive macroeconomic signals despite broader global trade tensions stemming from tariff challenges initiated by the Trump administration.

While Spain enjoys a growth rate that is only exceeded by Ireland, Croatia, Cyprus, and Malta, the Commission anticipates a slowdown for Spain in 2026, projecting a deceleration to 2.0%.

This adjustment reflects a one-tenth reduction compared to earlier estimates.

Meanwhile, Germany's economy is projected to maintain a stable GDP, while Italy and France are expected to grow by 0.7% and 0.6%, respectively.

The situation in Germany is of particular concern, given its significant exposure to the economic pressures arising from tariff conflicts, leading to a downward adjustment from an original growth estimate of 0.7% to 0%.

The European Commission has not factored in a newly announced German government package directed at defense and infrastructure, which may provide a potential uplift for Germany's economy.

For Spain, the deficit is projected to fall to 2.8%, below the excessive deficit threshold set by the EU, due to reduced energy support costs and increased revenue from new taxes introduced in December 2024. The Commission's forecasts also suggest the impact of last year's Valencia floods on Spain's budget deficit was considered an extraordinary event that will not lead to formal sanction procedures.

Brussels officials indicated that there is no immediate concern regarding the absence of approved budgets for 2025, as Madrid has presented a fiscal plan that aligns with deficit reduction objectives.

The Commission assesses that U.S. tariffs will have a lesser impact on Spain compared to other larger European economies more dependent on trade with the U.S., such as Italy and Germany.

However, Spain may still face indirect effects from the tariffs and the resultant investor uncertainty.

In calculating Spain's deficit, the Commission incorporated 6 billion of the 10 billion euros pledged in Prime Minister Pedro Sánchez's defense expenditure plan for this year, while leaving out the remaining 4 billion, which are yet to be disbursed as credits.

The European Commission based its economic projections on the assumption that reciprocal tariffs from Washington would be at the established 10% level since April 9, except for a 25% tariff on cars, steel, and aluminum, and with pharmaceuticals and semiconductors exempt from these tariffs.

It is noted that the estimates may vary depending on the culmination of ongoing trade negotiations between the European Commission and the U.S.

Dombrovskis compared the adverse economic effects of tariffs to those experienced during the pandemic and the Ukraine conflict, emphasizing that the ensuing outcomes suggest widespread losses.

However, he highlighted an increase in defense spending as a potential driver for future growth.

The Commission anticipates that Eurozone growth will accelerate to 1.4% in 2026, although this figure remains below the 1.6% expected six months prior.

The significant downward revisions in growth prospects have largely been attributed to weakening global trade conditions and heightened uncertainty over trade policies.