Consumer Sentiment Falters as Growth ForecastsFace Downward Revision
Global business sentiment has remained steady over the pastfour years, but consumer confidence has been deteriorating since late 2024,particularly in the eurozone, driven largely by trends in the US market,according to Professor Nikos Vettas. Speaking at the SteelOrbis 2025 SpringConference & 92nd IREPAS Meeting in Athens, Vettas noted that thisweakening consumer outlook has prompted moderate downward revisions to growthforecasts, signaling potential economic headwinds ahead. The divergence betweenbusiness and consumer sentiment creates an uncertain economic landscape whereplanning becomes increasingly difficult for industry stakeholders.
Advanced Economies Grapple with BallooningPublic Debt
Public debt in advanced economies surged significantlyfollowing the COVID crisis, Vettas observed, highlighting how governments'fiscal responses to the pandemic have created long-term financial challenges.While markets in advanced economies rallied during 2022-24, they have stalledin 2025 amid increasing policy uncertainties and energy price fluctuations."We are going to be in a world with higher money costs and higher energycosts, and my sense is that this is going to last for the next five years forseveral reasons," Vettas cautioned, suggesting a prolonged period ofelevated operational costs for businesses worldwide.
Commodity Markets Show Divergent Trends AmidGlobal Uncertainties
In the commodities space, gold has reached historic highswhile industrial metals such as aluminum, copper, iron ore, and lead have easedfrom their 2022 peaks. Vettas pointed out that following the Ukraine conflict,global food commodities also spiked, with inflation playing a significant rolein price movements. Currency markets remain particularly unpredictable, withVettas noting, "Foreign exchange rates are notoriously hard to predict,because they are very deep markets and whatever expectations people have arevery quickly incorporated into prices." He added that continuedoscillations appear inevitable, with further weakening of the dollar likely onthe horizon
Trade Volumes Resilient Despite EscalatingPolicy Uncertainties
The volume of global trade has maintained momentum despitepandemic disruptions, but trade policy uncertainty has reached levels exceedingeven the immediate post-COVID period. This uncertainty stems partly from theprotectionist stance of the new US administration. While announced tariffincreases haven't significantly impacted trade or investments yet, they havecreated a wait-and-see approach as businesses seek greater clarity beforecommitting capital. US imports have accelerated rapidly in recent months,reflecting what Vettas described as "a likely stockpiling strategy ofbusinesses ahead of anticipated tariffs" on a broader range of importedgoods.
EU-US Trade Relations Face Recalibration AmidShifting Tariff Landscape
Prior to recent developments, tariffs between the EU and USwere remarkably low compared to their other trading relationships. Vettas notedthat the average tariff rate imposed by the EU on imported products was 2.7%,while the US imposed an average of 2.2%. This relatively open trade environmentis now under threat as protectionist measures gain traction, potentiallydisrupting long-established supply chains and forcing businesses to reconsidertheir international strategies. The shift represents a fundamental challenge tothe post-World War II trade architecture that has underpinned global economicgrowth for decades
European Industry Confronts MultifacetedStructural Challenges
European industry faces numerous challenges, including astatic industrial structure, the green transition, a widening productivity gapwith the US, demographic decline, digital skills deficiencies, defense spendingrequirements, and immigration management. Vettas highlighted that theproductivity gap between the EU and the US, measured by GDP per hour worked,has doubled from 15% in 2002 to 30% in 2023. Only ten EU member states allocateat least 2% of GDP to defense, compared to 6% or more for the US. The EUpopulation is projected to decline to 447.9 million by 2050 and further to419.5 million by 2100, with the median age increasing by 5.8 years between 2022and 2100
Demographic Decline and Digital DeficienciesThreaten European Competitiveness
"We're getting older and fewer," Vettas observed,adding, "You cannot be a society where half of the people are notproducing. If you are, then you have to make sure that the younger generationsare empowered with very strong technologies." Despite Europe's broad andhigh-quality education system, digital skills among the general populationremain inadequate, partly due to the aging demographic profile. Vettas alsoemphasized the need for better integration of migrants and refugees ineducation, political participation, permanent residence rules, citizenship,basic rights, and anti-discrimination measures, noting that improvedintegration promotes economic growth, social cohesion, and prosperity. Thegreen transition presents another significant challenge, as industries haverealized its substantial short-term costs, particularly as the EU's climateneutrality targets are considerably more ambitious than those of itscompetitors.
Key Takeaways:
* Global economic resilience has withstood multiple majorcrises, but consumer sentiment is weakening while business confidence remainssteady, creating an uncertain outlook for future growth.
* The productivity gap between the EU and US has doubledfrom 15% to 30% over two decades, compounded by Europe's demographic declineand digital skills deficiency.
* Professor Vettas assigns a 10% probability to a scenariowhere accumulated pressures lead to system collapse, resulting in reducedglobal trade and increased protectionism.
