European economic growth slows down, European Central Bank executive committee: cutting interest rates cannot solve structural economic problems.

Isabel Schnabel, a member of the Executive Board of the European Central Bank, said that lowering interest rates cannot solve the structural challenges facing the Eurozone economy. Speaking at the Institute for Employment Research in Germany, Schnabel stated that the economic growth in the Eurozone is only moderate at the moment, and trade uncertainty is rising sharply, limiting the help provided by loosening monetary policy. She stated, "Lowering interest rates can alleviate economic weakness, but cannot solve structural crises, including high energy prices, loss of competitiveness, and labor shortages." Schnabel believes that Europe needs to readjust its economy, especially in the face of the return of US President Trump and his preference for tariffs. She said, "Facing increasing geopolitical divisions, it is necessary to rethink the export-oriented growth model." Schnabel's recent statements align with her previous views. She had warned at the end of last year not to lower interest rates significantly to solve problems beyond the scope of monetary policy. European economy in dire straits, growth prospects bleak Since June last year, with inflation falling to 2%, the European Central Bank has been lowering interest rates to boost the struggling economy, however, the European economy still shows no signs of improvement. Preliminary data released by Eurostat on January 30th showed that the Eurozone economy stagnated in the fourth quarter of last year, dragged down by contraction in the major European economies of France and Germany. Analysts point out that while the European Central Bank will continue to loosen monetary policy and the European Commission has proposed growth plans amidst generally weak economic conditions, it is difficult for the European economy to turn around in the short term, with growth prospects still dim. At the same time, the European economy is also facing the threat of Trump's tariff "big stick." Trump has complained on multiple occasions about the US trade deficit with the EU and threatened to impose tariffs on EU goods. On February 10th, Trump signed an executive order announcing a 25% tariff on all imports of steel and aluminum into the US. Trump also stated that there would be "no exemptions or exclusions" on the requirements. The United States is the most important export market for European goods. Trump's tariff policy could further harm the already fragile European economy. Chief Economist at Fitch Ratings, Brian Coulton, stated that Trump's tariff policy would undoubtedly have a negative impact, especially against the backdrop of internal growth challenges facing the European economy. He pointed out that one of the most affected European economies could be Germany, mainly because Germany is a very open economy with a high proportion of exports in its GDP, and the US is one of its important trading partners; even before the tariff adjustments, Germany's exports were under pressure, especially in areas like the automotive industry, so this impact is undoubtedly negative. Fitch Ratings has downgraded its growth forecast for the Eurozone in its latest global economic outlook, partly based on the assumption that EU imports could be subject to a 10% tariff. Brian Coulton pointed out that while the negative impact on Europe is not as large as on Mexico and Canada, it is still a substantial negative shock, especially in the context of weak economic performance within Europe. Bert Colijn, Chief Economist at ING Group, stated that in the short term, the European economy remains in a slump and is not expected to emerge from it this winter; preliminary signs indicate that economic growth in the first quarter of 2025 will still be zero. He predicts that demand may drive some growth in the European economy later this year. The European Central Bank expects Eurozone economic growth to be only 1.1% in 2025 and 1.4% in 2026. According to Eurostat's preliminary forecasts, manufacturing in the Eurozone is still contracting, while service activities are expanding, consumer confidence remains fragile, and households have not significantly increased spending due to actual income growth.