19 May | Euro

Europe's economic outlook is clouded by three key issues – Capital Economics

Europe's economic outlook is clouded by three key issues – Capital Economics

According to strategists at Capital Economics, the improvement in investor sentiment regarding Europe's economic prospects may be overshadowed by a number of unresolved problems. The company's experts have identified three key issues the region is facing.

The first one is whether other countries in the bloc will be able to follow the footsteps of Germany, which has shifted to a softer fiscal policy. Capital Economics is skeptical about the possibility of this. According to experts, an attempt to do so could lead to a national fiscal crisis, especially in France and Italy, which are already struggling with debt.

The second point is Europe's ability to undertake structural reforms. Without reforms in the area of artificial intelligence and other emerging technologies, the region risks being left behind other major economies, especially against the backdrop of growing competition from Chinese companies.

The third key issue is related to geopolitics. Europe seeks to act as the “third pole” amid growing tensions between the US and China. However, the firm argues that internal divisions are still limiting its global influence.

Capital Economics plans to further explore these issues in future reports.

Elena Dorokhina MarketCheese
Brent sell
Period: 19.09.2025 Expectation: 188 pips
Supply glut puts pressure on Brent prices
Today at 07:20 AM 5
Period: 18.09.2025 Expectation: 160 pips
Buying gas with $3.150 target amid completing correction
Yesterday at 11:58 AM 127
Period: 12.09.2025 Expectation: 720 pips
Buying EURUSD amid expectations of weaker US inflation report
Yesterday at 10:57 AM 79
Expectation: 1000 pips
146.8–148.5 flat floor continues to lure USDJPY
Yesterday at 10:32 AM 114
Period: 18.09.2025 Expectation: 39000 pips
Buying ETHUSD with $4,790 in sight amid weak US economic data
Yesterday at 08:51 AM 110
Period: 12.09.2025 Expectation: 250 pips
Selling SPX if US inflation exceeds forecasts
Yesterday at 08:40 AM 118
Go to forecasts