The eurozone economy lost momentum in the third quarter as high energy prices from the US-Iran war reached households and businesses. Gross domestic product across the 21-country currency area grew 0.4% from the previous quarter, down from 0.6% in the second quarter.
Annualised growth slowed to 1.7%, compared with 2.6% in the preceding period and 3.4% in the United States. The figures suggest the resilience visible early in the energy shock is weakening as elevated oil and gas costs extend toward 2027.
France performed worse than the regional average. Its economy contracted 0.1% in the three months through September after stagnating in the second quarter and shrinking 0.2% in the first, leaving quarterly output without growth since the end of 2025.
The contraction compounds a fiscal problem. French public debt is close to 120% of GDP, and the government expects the 2026 deficit to reach 5.4%, well above the European Union's 3% ceiling. A fragmented parliament has made agreement on corrective measures harder.
Sovereign bond yields have climbed to multidecade highs, raising government financing costs and passing tighter conditions to households and companies. Business surveys showed activity falling back into contraction in October and firms reporting their bleakest outlook in six and a half years.
The International Monetary Fund raised its 2026 eurozone growth forecast to 1.1% but warned about energy pressure and weak confidence. It projects inflation of 3.1% this year and 2.8% in 2027, both above the European Central Bank's 2% target.
The ECB kept rates unchanged after increases in June and September, while signalling downside growth risks. With oil above $110 a barrel and winter demand approaching, the central question is whether inflation forces another rate rise even as France and other economies need cheaper credit to stabilise activity.
