According to the EY European Economic Outlook report, Europe's economic outlook remains fragile, influenced by global trade tensions and geopolitical risks, which may have significant implications for India's trade and competitiveness. The report notes that the recently announced EU-India Free Trade Agreement (FTA) could create mixed sectoral impacts, benefiting certain industries while increasing competition for others, particularly in the minerals and clothing sectors. The report warns that tariffs imposed by the United States could dampen economic growth in the European Union, potentially shaving 0.5 percentage points off GDP growth in 2026, with the most severe effects felt in Ireland and Nordic countries. Additionally, geopolitical tensions in the Middle East could raise inflation by 0.3 percentage points and reduce GDP by 0.2%. Despite these challenges, the euro area is expected to grow at a modest pace, with growth forecasts of 1.3% in 2026. The report also highlights that investments in artificial intelligence could enhance productivity and economic output in Europe, potentially raising GDP by up to 4% by 2033, presenting opportunities for India to deepen trade engagement with Europe.