FRANKFURT (Realist English). The economy of the European Union found itself at a crossroads in April 2026. On the one hand, it showed stock market resilience and growth in some individual countries; on the other, it faced the threat of stagflation amid the energy shock caused by the war in the Middle East and a trade war with the United States.
GDP: eurozone stalls
According to preliminary Eurostat data published on 30 April, eurozone GDP in the first quarter of 2026 increased by only 0.1% compared with the previous quarter – below the 0.2% expected by analysts and significantly slower than the 0.2% recorded in the fourth quarter of 2025. In annual terms, growth was 0.9%.
The main reasons are a decline in consumer activity, a contraction in exports, and industrial stagnation against the backdrop of a sharp rise in energy prices caused by the closure of the Strait of Hormuz. Economic sentiment in the eurozone, measured by the European Commission’s Economic Sentiment Indicator, plunged in April from 96.2 to 93 – the third consecutive monthly decline.
Inflation: above 3% – highest since September 2023
Eurozone inflation accelerated to 3.0% year‑on‑year in April, up from 2.6% in March, beating market expectations. This is the highest figure since September 2023. The main driver was energy prices, which jumped 5.1%. Annual inflation reached 2.9% in Germany, 2.2% in France and 3.5% in Spain.
Unemployment: record low
The eurozone unemployment rate fell to 6.2% in March, matching analysts’ expectations and representing a record low over recent decades.
Industrial production: decline and structural changes
According to Eurostat data for February 2026 (the most recent available), industrial production fell by 0.6% year‑on‑year in the eurozone and by 0.1% in the EU as a whole. The largest declines were recorded in:
- Luxembourg: -17.0%
- Ireland: -10.0%
- Bulgaria: -8.0%
Growth was recorded in Sweden (+7.7%), Belgium (+7.4%) and Denmark (+5.8%).
European industry is being forced to cut production because of rising electricity prices caused by the war in the Middle East. The European Chemical Industry Council announced the closure of some plants, as the sector has been squeezed between high electricity prices and the need to invest in phasing out coal power.
Nevertheless, as noted by Mikhail Goncharov, Chairman of the Board of Directors of Greenlife Factory, the EU retains a core of critically important industries: pharmaceuticals, engineering, certain segments of chemicals and metallurgy that support key sectors from automotive to defence.
Executive Vice‑President of the European Commission Valdis Dombrovskis stated at a forum in Hanover that the EU sees industry as a key foundation for economic growth and security in an environment of global instability.
Euro exchange rate: March drop and April uncertainty
The euro remained under pressure from the energy shock in April. In March, the euro fell about 2.5% against the dollar – its steepest monthly drop since July – losing nearly 2% over the first quarter. This decline is almost entirely explained by Europe’s vulnerability to high oil prices. Unlike the United States, which has been a net energy exporter for nearly a decade, the eurozone is heavily dependent on oil imports.
According to the Central Bank of Russia, the euro fluctuated in the range of 87.8–89.6 rubles in April. The official euro exchange rate on the international market on 28 April was $1.1680. The EUR/USD pair held a range around 1.1750 amid cautious optimism over the US‑Iran ceasefire, but the ongoing naval blockade of Iranian ports and the lack of an Iranian response to the truce kept investors on edge.
US: trade war on the doorstep
April was a month of sharp deterioration in trade relations with the United States. On 3 April, Donald Trump imposed 20% “reciprocal” tariffs on goods from the European Union. More than 70% of EU exports to the US, worth €380 billion, were affected. EU steel and aluminium were already subject to a 25% tariff that took effect on 12 March. The same rate was applied to EU cars from 3 April, and from 3 May it will be extended to car parts.
In response, an emergency meeting of EU foreign trade ministers was held in Luxembourg on 7 April. The EU prepared packages of countermeasures, to be introduced in separate batches: the first took effect on 15 April, the second on 15 May.
EU Trade Commissioner Maroš Šefčovič said: “We cannot give in when it comes to our legislation, but we are ready for dialogue.” Washington has repeatedly criticised the EU’s Digital Services Act and Digital Markets Act, demanding their relaxation.
China: dialogue amid excess capacity
On 30 April, Chinese Foreign Minister Wang Yi, in talks with Belgian Deputy Prime Minister Maxime Prévot, called on Belgium to play an active role in settling trade and economic differences between the EU and China. China also called on Europe not to think in zero‑sum terms, but to build relations on mutual benefit. Chinese Foreign Ministry spokesman Lin Jian said: “We hope that the European side will abandon the outdated approach in which one side wins only at the expense of the other.”
Russia: 20th sanctions package
On 23 April, the European Union approved the 20th package of anti‑Russian sanctions, which had been stalled since February, in a significantly reduced form: the central provision – a ban on the transport of Russian oil – was removed from the document.
The package includes:
- a ban on the sale of tankers to Russia and restrictions on operations with the ports of Murmansk, Tuapse and the oil terminal at the port of Karimun (Indonesia);
- a ban on the import of metals, chemicals and critical minerals worth more than €570 million;
- 20 Russian banks added to the list of prohibited transactions;
- 46 vessels and 177 individuals and entities added to the sanctions list.
ECB decision: rate unchanged at 2%
At its meeting on 30 April, the ECB Governing Council left key interest rates unchanged for the fourth consecutive time: the deposit rate remained at 2%, the main refinancing rate at 2.15%.
However, inflation expectations rose sharply: consumer inflation expectations for the next 12 months reached 4% in March, strengthening the hand of the “hawks” in the ECB. ING analysts note that the combination of companies’ expectations of price increases and rapidly rising consumer inflation expectations is precisely the scenario the ECB had wanted to avoid. In ING’s view, the probability of a June rate hike has increased significantly.
European Commissioner for the Economy Valdis Dombrovskis acknowledged that the European Union is in a “real risk of a stagflationary shock”. Berenberg experts said: “As long as the Strait of Hormuz remains closed and widespread uncertainty weighs on confidence, the eurozone and UK economies are likely to suffer a bout of stagflation.”
Results
April 2026 showed that the EU economy is at a point of bifurcation. On the one hand, there is labour market resilience and record stock market growth (the DAX gained 7.00% in April, the CAC 40 gained 3.80%). On the other hand, there is the threat of stagflation, a trade war with the United States worth €380 billion, the 20th package of sanctions against Russia, and growing pressure on the ECB to raise rates.
Stock indices ended April with gains: the British FTSE 100 rose 1.90%, the French CAC 40 rose 3.80% and the German DAX rose 7.00%.
The key issue that will determine EU economic dynamics in the coming months is the duration of the Strait of Hormuz blockade and the ECB’s ability to balance between fighting inflation and supporting economic growth.
