The eurozone economy expanded by 0.4% in the second quarter of 2026 compared with the previous three months, twice the average forecast of economists. Across the European Union, GDP increased by 0.5%, while annual eurozone growth reached 1%.
The result is significant after growth effectively stalled in the first quarter. Higher energy costs, trade restrictions and weak external demand have continued to pressure European businesses. Yet investment in digital technologies, defence and infrastructure, together with relatively resilient household consumption, helped the region absorb another difficult external environment.
The stronger quarter demonstrates resilience. It does not yet prove that Europe has overcome its long-standing problems of weak productivity, expensive energy and technological dependence.
Growth Is Broad, but Uneven
The headline figure does not fully reveal where growth came from. Detailed data on consumption, investment, government spending and foreign trade will follow later. This means that explanations linking the acceleration directly to artificial intelligence investment remain plausible, but not yet conclusive.
Performance also differed significantly between countries. Germany, France and Italy each recorded growth of only 0.2%. Spain expanded by a stronger 0.7%, supported by services, domestic demand and public investment.
Ireland recorded an exceptional 3.9% increase after a 7% contraction in the previous quarter. Its GDP is heavily influenced by multinational technology and pharmaceutical companies, making quarterly figures unusually volatile. The eurozone therefore appears stronger overall than the performance of its largest economies alone would suggest.
AI Investment Is Already Supporting Demand
Digital investment is becoming a larger part of European economic activity. Between 2014 and 2024, eurozone spending on software, databases, research, computing equipment and other digital assets expanded more than three times faster than GDP. By 2025, such investment was more than 60% above its 2014 level.
Companies intend to continue spending. Eurozone businesses expect to allocate around 9% of their investment budgets to artificial intelligence in 2026. The share of employees using AI systems professionally increased from 26% in 2024 to 40% in 2025.
However, adoption remains much deeper in some companies than others. Only 7% of businesses report extensive AI use. For many organisations, the technology is still concentrated in document preparation, information analysis, customer service and administrative automation.
This creates an important distinction between investment and productivity. Spending on software, processors and data centres appears immediately in the economy. Productivity improvements require companies to redesign processes, train employees and scale new business models. Europe is already paying for the technology, while the full economic return remains uncertain.
Europe Still Faces a Digital Investment Gap
Artificial intelligence could make a meaningful contribution to long-term growth. Under favourable conditions, widespread AI adoption could add approximately 0.3–0.4 percentage points to annual productivity growth over the next decade.
Yet Europe continues to invest significantly less in digital assets than the United States. Digital expenditure represented around 12.4% of total eurozone investment in 2024, compared with 24.3% in the US. Estimates for 2025 widened the difference to approximately 13% versus 27.3%.
The EU is attempting to close part of this gap. Plans for seven large AI computing facilities involve approximately €30 billion in investment, combining EU funding, national government contributions and private capital.
The challenge is that Europe remains dependent on advanced processors and cloud infrastructure supplied largely by US companies. Data centres also require substantial electricity, grid capacity and cooling resources. Without faster energy investment, growing digital demand could increase costs elsewhere in the economy.
Public Spending Provides Another Growth Engine
Government expenditure is also supporting activity. European countries are increasing investment in defence, transport, energy and digital infrastructure. Additional German and European defence and infrastructure spending could cumulatively add around 0.5 percentage points to eurozone growth between 2025 and 2028.
The economic effect will depend on where the money goes. Investment in electricity networks, railways, research and productive infrastructure can increase long-term capacity. Imported equipment and short-term government consumption generate a smaller lasting effect.
At the same time, EU post-pandemic recovery programmes are approaching their end. Countries with high public debt will have less room to replace European funding with national borrowing, potentially increasing economic divergence across the currency union.
A Moderate Recovery Remains the Most Likely Scenario
Consumption has remained more resilient than feared as labour markets hold up and previous declines in inflation support real incomes. Yet consumer confidence remains below its long-term average, while expensive energy and high borrowing costs continue to constrain households.
The European Central Bank projected eurozone growth of only 0.8% in 2026, followed by 1.2% in 2027 and 1.5% in 2028. Even after the stronger second quarter, these figures point to gradual recovery rather than a powerful expansion.
The most likely scenario is therefore moderate growth. Public investment and digital spending may prevent renewed stagnation, but stronger performance will require deeper structural changes. Europe needs more integrated capital markets, faster energy infrastructure development, greater financing for high-growth companies and broader adoption of productivity-enhancing technologies.
The second-quarter result gives Europe more time to address these challenges. Whether 0.4% growth becomes the beginning of a stronger economic model will depend on whether today’s investment eventually translates into higher productivity, stronger European suppliers and lower business costs.