Europe careens toward a downturn as its biggest economies fight crises at home

The economy in Europe is showing signs of a downturn, with Germany and France facing political and economic challenges. Business activity in both countries fell more than expected in September, indicating a slowdown in Europe’s traditional growth drivers. Germany’s economy is struggling, with the possibility of a recession, while France is dealing with fiscal challenges and political uncertainty. The newly formed government in France under Prime Minister Michel Barnier faces the task of addressing immediate fiscal issues. Analysts predict that the economic and budgetary reforms in both countries may be delayed due to political instability. Financial expert Roche recommends staying short on French government bonds, even if it requires patience. The rise of far-right parties in Germany, such as the Alternative for Germany (AfD), poses a threat due to public discontent with issues like immigration and economic downturn. Chancellor Olaf Scholz’s Social Democratic Party narrowly held on to power in recent state elections, preventing the AfD from gaining more influence. Similar political developments are seen in France, where the far-left and far-right are gaining popularity, leading to an unstable minority government. These trends signal a shift away from traditional center politics in the European Union’s largest economies.