Eurozone GDP contracts 0.2% in Q1 2026, first negative quarter in over a year

The eurozone economy contracted by 0.2% in the first quarter of 2026 compared with the previous three months, marking the currency bloc's first entry into negative territory in more than a year, data showed on June 5. The decline was heavily driven by a dramatic slump in Ireland, which obscured more mixed performances among the region's major economies. The 21-member area's gross domestic product was dragged down by Ireland's volatile multinational sector, often a source of outsized swings in aggregate figures. Excluding Ireland, output across the eurozone was flat, highlighting a fragile backdrop. Germany, the bloc's largest economy, recorded a marginal contraction, while France posted near-stagnant growth. In contrast, Spain and Italy eked out modest expansions, supported by resilient services activity. The downturn puts pressure on the European Central Bank ahead of its June 12 policy decision, where it must weigh signs of economic fragility against stubbornly elevated core inflation. Analysts noted that the headline contraction risks fueling recession fears, though underlying demand remained subdued rather than collapsing. Eurostat's final estimate confirmed the preliminary reading, underscoring a challenging start to 2026 for the single-currency zone.