Economic growth across the eurozone slowed sharply in the opening months of 2026, but a handful of countries on Europe’s southern and eastern edges continued to expand far faster than the bloc’s traditional economic powers.
New figures released by Eurostat showed the eurozone economy grew just 0.1 percent in the first quarter compared with the previous three months and 0.8 percent year-on-year. That marked a clear slowdown from the 1.3 percent annual growth recorded in the final quarter of 2025.
The broader European Union performed slightly better with annual growth of 1 percent, though both figures remained well behind the United States, where the economy expanded 2.7 percent over the same period.
Despite the wider slowdown, Cyprus, Bulgaria and Spain emerged as the bloc’s fastest-growing economies, each recording annual growth rates above 2.5 percent.
Cyprus led the rankings with annual growth of 3 percent during the first quarter, nearly four times the eurozone average. The island nation continued to benefit from strong private consumption, tourism and investment supported by European Union recovery funds.
However, rising energy costs linked to tensions in the Middle East have begun to weigh on the economy. Inflation accelerated sharply in recent months, while tourism arrivals reportedly dropped after regional security concerns affected travel demand.
Economists said Cyprus still entered the year from a relatively strong fiscal position. Government accounts posted a surplus equal to 1.5 percent of gross domestic product in the first quarter, giving authorities room to respond to economic pressures.
Bulgaria followed closely with annual growth of 2.9 percent, supported by consumer spending, European Union investment funding and defence-related expenditure. The country formally adopted the euro at the start of 2026, becoming the newest member of the single currency bloc.
European Central Bank President Christine Lagarde previously described Bulgaria’s entry into the eurozone as the culmination of a long economic integration process.
Yet analysts warned that inflation and government spending are becoming growing concerns. Consumer prices surged to 6.2 percent in April, while the fiscal deficit widened beyond European Union limits.
Spain remained the strongest performer among the eurozone’s major economies, recording annual growth of 2.7 percent. Household spending, investment and infrastructure projects funded through European recovery programmes continued to support the economy.
The contrast with Europe’s largest industrial economies was striking. Germany recorded annual growth of just 0.3 percent, while France expanded 1.1 percent and Italy grew 0.7 percent.
Analysts said the figures reflected a broader shift in Europe’s economic momentum away from its traditional industrial core toward southern and eastern member states, where investment flows, tourism and labour market growth are providing stronger support despite mounting geopolitical and inflationary pressures.
