Eurozone Slows to 0.4% in Q3 as France Contracts Amid Political Turmoil

The eurozone economy lost momentum in the third quarter of 2026. The European Union's statistics agency, Eurostat, reported on Friday (30/10) that the gross domestic product of the 21 member states eased to 0.4% quarter-on-quarter, down from 0.6% in the April-June period. Despite the slowdown, the figure still beat the consensus forecast of economists in a Reuters poll, which had targeted only 0.2%.

Yet behind the seemingly resilient aggregate figure, cracks are becoming clearly visible. France—the bloc's second-largest economy—unexpectedly shrank 0.1%, reversing its previous expansion. The cause is not merely cyclical, but a combination of swelling national debt, surging borrowing costs, and political deadlock in efforts to curb the budget deficit. A wave of national protests over purchasing power that at one point turned into riots has also worsened the investment climate.

Germany, the main engine of the European economy, managed to grow only 0.2% in the same quarter. Italy even stalled at zero percent. Meanwhile, Spain recorded 0.6% expansion thanks to a productive labor market, a healthy tourism sector, strong domestic demand, and a relatively better fiscal position—even though the country is also being rocked by mass protests over the cost of living and housing that have forced early elections next month. Ireland posted the highest growth at 5.5%, but that figure is often volatile due to the large role of multinational companies based there but operating abroad.

On the monetary policy side, the European Central Bank (ECB) decided to keep interest rates unchanged at its Thursday meeting. The ECB reasoned that the surge in energy prices had not yet seeped into second-round effects in the broader economy. Nevertheless, several analysts believe the central bank is still leaving the door open for an additional rate hike in December, especially if energy cost pressures continue. The ECB itself acknowledged that downside risks to growth have increased.

"The eurozone is showing unexpected resilience amid great economic and geopolitical uncertainty," said Joe Nellis, Head of Economic Research at accounting firm MHA. But he warned that this resilience could mask long-standing structural challenges: weak productivity and investment spending, demographic pressures, and declining industrial competitiveness.

Nellis added that the 2027 outlook is increasingly complicated by potential continued inflationary pressures. "Unless the Middle East crisis is resolved soon, energy and transport costs will keep rising, putting greater pressure on the cost of living and household finances at a time when consumer confidence is weak," he said.

For Indonesia, the eurozone slowdown is not merely news from far away. The European Union is one of the main export markets for the country's manufactured products—from palm oil and textiles to electronic components. Weakening demand in Germany and France could pressure the volume of Indonesian exports to the region, especially if European consumers become more cautious in spending. On the other hand, the global energy price turmoil that Nellis fears could affect Indonesia's trade balance position, given that part of its fuel needs are still imported. The government needs to monitor this dynamic so that the non-oil and gas export growth target remains realistic.

Going forward, the market's focus will be on two things: whether the ECB actually raises interest rates again in December, and whether France can escape the deficit trap without triggering new social unrest. If France's contraction continues into Q4, the eurozone risks losing one of its main pillars. The question is, will the resilience that Nellis praises hold, or will it prove a mirage before the structural storm hits?