FRANKFURT, Germany — The economy of Europe is beginning to move away from stagnation, although growth is expected to be limited in the upcoming months. This shift is largely attributed to consumers regaining some of the purchasing power they previously lost due to rising inflation, according to a recent report by the European Union’s executive commission.

However, there are still significant risks that could impact the economic landscape, particularly from protectionist actions taken by major trading partners. U.S. President-elect Donald Trump’s discussions about potentially imposing new tariffs or import taxes on foreign goods have raised concerns. European Economic Commissioner Paolo Gentiloni noted that a move towards protectionism in U.S. trade policy could be detrimental to both the U.S. and European economies. He emphasized the EU’s readiness to engage with the new American administration constructively, while also being prepared to defend the principle of open trade.

The report indicates that the 20 countries that comprise the Eurozone are expected to experience modest growth, projected at 0.8% for this year and anticipated to increase to 1.3% next year. Gentiloni remarked, “Following the stagnation of 2023, the European economy is undergoing a recovery and is poised for acceleration over the next two years. However, this growth remains limited and subject to significant downside risks.” The upturn in growth began earlier this year, resulting from new wage agreements that have helped to improve household budgets. The commission has observed that the restrictions on consumer spending seem to be easing.

The report outlines expectations for increased consumption, as wages regain their purchasing power and interest rates show signs of decline. It is anticipated that inflation will average around 2.1% in the coming year, which is slightly above the target set by the European Central Bank of 2% but a considerable decrease from the high of 10.6% recorded in October 2022.

Germany, the largest economy in the Eurozone, is projected to face a second consecutive year of declining output, with a decrease of 0.1% expected this year. However, a modest recovery is anticipated next year, with growth projected at 0.7%. As the overall economic conditions evolve, the European economy aims to adapt and stabilize in the face of these challenges.