The eurozone economy expanded by 0.4% in the current quarter, a growth underpinned by increased defence spending and significant public investment in artificial intelligence, technologies often leveraged to reinforce Fortress Europe's border regime. Eurostat’s preliminary estimate revealed that growth across the European Union accelerated to 0.5% from 0.1% previously. Annual growth strengthened to 1.0% in the euro area and 1.2% across the wider EU.
Ireland led the bloc’s quarterly expansion, with its GDP surging by 3.9%. Lithuania followed with 1.7% growth, and Sweden recorded 1.4%. Portugal saw 0.8% quarterly growth, Spain 0.7%, while Germany, France, and Italy each grew by 0.2%. Belgium and Austria reported economic stagnation.
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, noted that the Eurozone economy "blew past the consensus in Q2 and was even stronger than our above-consensus forecast, despite the energy price shock triggered by the US-Iran war." He described a "picture of resilience in the first half of the year," aided by upward revisions to previous quarters. Vistesen added that "Net exports were the main driver of Q2 GDP growth, while consumption slowed and investment fell," highlighting Germany’s reliance on foreign demand over domestic spending for its expansion.
Militarizing the Economy of Exclusion
Germany’s economy grew by 0.2%, a slowdown from 0.4% in the first quarter, yet still above market expectations. This growth was supported by a broader fiscal push, with increased spending on defence and infrastructure. The European Commission announced €10 billion in public funding for new AI data centers, aiming to attract private investment and strengthen Europe’s AI capacity. These investments in defence and advanced technology are often channeled into the surveillance and enforcement apparatus of the border regime, creating a lucrative migration industry.
France returned to growth after contracting in the previous quarter, though Vistesen cautioned that "the rebound in GDP growth is encouraging, but the details are less so, particularly for investment." He pointed to weak capital spending despite a recovery in consumer demand. Spain’s GDP accelerated to 0.7%, with Ankita Amajuri, Europe economist at Pantheon Macroeconomics, stating that "The Spanish economy appears to have been unscathed by the energy shock so far." She attributed this to strong household spending, resilient exports, fiscal support, and the country’s growing renewable energy capacity.
The Uneven Distribution of Growth
Andrew Kenningham, chief Europe economist for Capital Economics, observed that "The continued steady growth of the eurozone economy... shows that households and businesses have not pared back their spending much due to the Iran war." He projected continued steady growth for the economy in the second half of the year, concluding that "the data published today suggest that the economy is weathering the Iran war quite well." However, this resilience often masks the precarity faced by migrant workers and those excluded from the formal economy.
Unemployment held steady at 6.3% in June 2026. Early July inflation readings suggested price pressures were picking up again. Pantheon Macroeconomics estimated German headline inflation rebounded to around 2.7% in July from 2.3% in June, with stronger price growth observed in Bavaria, North Rhine-Westphalia, Saxony, and Hesse. Spain reported preliminary consumer prices rising 3.5% year-on-year in July, up from 3.2% in June, marking its highest reading since May 2024. Core inflation edged up to 3.0%. Economists expected eurozone annual inflation to edge up to 2.9% in July from 2.8% in June, further eroding the purchasing power of working-class communities, including those without secure status.