The eurozone’s two largest economies have opened 2026 with a resilience that caught most forecasters off guard, posting first-quarter growth figures that suggest an initial capacity to absorb the shock of the Iran conflict. Spain’s economy expanded by 0.6 percent, only two tenths of a point below the previous quarter’s pace and well above the 0.3 percent that some automated models had predicted just days earlier. Viewed from Madrid, the deceleration was milder than feared, despite poor winter weather that dampened tourism and the early ripple effects of higher energy prices and disrupted supply chains. Germany, meanwhile, recorded a 0.3 percent increase in gross domestic product, beating the consensus expectation of 0.2 percent and marking a slight acceleration from the 0.2 percent notched at the end of 2025. Analysts in Frankfurt note that private consumption and public spending were the main drivers, with exports also edging higher, though the data largely reflect activity before the full force of the energy shock began to bite in late February and March.

Yet the numbers, while welcome, mask a deeper unease that is far from dissipated. In Berlin, the coalition government of Chancellor Friedrich Merz has drawn scant praise from industry leaders, who point to a meagre first-year record and warn that forward-looking indicators are already flashing red. German unemployment remained above the psychologically important threshold of three million in April, and the industrial lobby has voiced sharp criticism of the administration’s economic stewardship. From the perspective of Rome, where Il Sole 24 Ore has reported extensively on the fragility beneath the surface, the German growth figure is less a vindication than a temporary reprieve. The Iran conflict, which erupted at the end of February, began to distort energy markets and industrial supply chains only in the final weeks of the quarter, meaning the full impact is yet to register in official accounts.

Looking ahead, the mood among forecasters across Europe is guarded. The Spanish economy, while still outperforming many peers, faces headwinds from sustained inflation in energy-intensive sectors and a likely slowdown in tourist arrivals if the geopolitical crisis deepens. In Germany, the mix of rising producer prices and faltering foreign demand threatens to turn a modest first-quarter gain into a second-quarter contraction. What these early GDP releases do reveal is a degree of underlying momentum that has bought time for policymakers – but, as analysts in both Madrid and Berlin caution, the respite may prove short-lived if the Iran situation escalates further. The real test for both economies will come in the months ahead, when the lagged effects of higher costs and uncertainty are expected to work through the system. For now, Europe’s heavyweights have shown they can still surprise; the question is how long that surprise can last.