The backdrop: The EU’s two largest economies face different but converging risks.
- Germany’s economy contracted 0.3% in Q2—worse than the preliminary -0.1% estimate—as manufacturing slumped after a temporary surge in US orders aimed at dodging tariffs, per Destatis.
- French Prime Minister François Bayrou will seek a vote of confidence in the National Assembly on September 8, a move likely to topple the government and inject fresh uncertainty into an economy heavily reliant on consumer spending. A political crisis could even push France into recession, Carrefour SA CEO Alexandre Bompard warned, per Bloomberg.
Why it matters: France and Germany wield outsize influence in the eurozone, with their combined GDP making up nearly half (48%) of the bloc’s total. Shifts in their consumer spending can send ripples across the continent.
- In Germany, consumer sentiment remains fragile. Confidence weakened in August as income and economic expectations dropped sharply, per NielsenIQ. Consumers’ willingness to buy and save slipped slightly, leaving retailers in a tough position.