When economists talk about economic health, they often turn to gross domestic product (GDP). But GDP tells us little about what ordinary households actually take home after inflation. A more revealing metric is real household income per capita, which adjusts earnings for price changes and reflects what people can truly spend or save.
New data from the OECD, covering 16 European countries, shows a clear divergence in living standards across the continent in 2025. While 14 nations saw real household incomes rise compared to 2024, two recorded outright declines. The overall picture is one of slowing momentum: average growth across the OECD fell to 0.8% in 2025, down from 2.1% the previous year.
Poland and Portugal at the Top
Poland led Europe for the second consecutive year, with real household income per capita growing by 4.1% in 2025. The OECD attributed this to rising employee compensation, which offset reductions in social benefits. The result is a sustained improvement in Polish living standards that stands out among EU member states.
Portugal followed with 2% growth, while the Netherlands posted 2.3%. Denmark (1.9%), Greece (1.8%), and Spain (1.5%) also recorded gains above 1.5%. In Greece, the OECD noted that higher net property income and a drop in unemployment to its lowest level since 2009 were key drivers.
Belgium (1.4%), Hungary (1.2%), and Sweden (1.2%) each grew by more than 1%.
Major Economies Stagnate
Among the eurozone's largest economies, performance was notably weaker. Spain was the best performer among the big five, with 1.5% growth. Italy matched the OECD average at 0.8%, but its fourth quarter saw a sharp contraction of 0.9%, driven by rising inflation and falling property income.
Germany managed only 0.6% growth, while the United Kingdom also recorded 0.7%. The UK did see a solid rebound in the final quarter, rising 1.1% after a 1.2% drop in Q3, thanks to higher wages and social benefits combined with lower taxes on income and wealth.
France brought up the rear among major economies, with a meager 0.2% increase. This places the Cinquième République well below the European average, raising questions about household purchasing power in the eurozone's second-largest economy.
Finland and Austria in Decline
Only two countries saw real household incomes fall in 2025. Finland recorded a 0.7% drop, which Tuomas Matikka of the VATT Institute for Economic Research linked to slow economic growth, rising unemployment, and cuts to social benefits and public spending aimed at reducing the deficit. The OECD also pointed to higher taxes on income and wealth.
Austria experienced the steepest decline, at 1.8%, a dramatic reversal from 3.6% growth in 2024. The swing highlights the volatility that can affect smaller open economies.
Across the 16 countries surveyed, only four—Belgium, Denmark, Sweden, and the Netherlands—saw faster growth in 2025 than in 2024. For most, the trend was one of deceleration.
The data underscores a broader challenge for European policymakers: while headline GDP figures may appear stable, the lived experience of households varies widely. As the OECD's numbers show, real income growth is not evenly shared, and even within the eurozone, national trajectories are diverging.
