Despite a slight improvement in 2024, distress levels across Europe remain elevated. Key takeaways European Special Situation markets have seen a rise in liability management exercises, which in turn has led to large co-op agreements between creditors. The European business cycle has diverged from the US, which is creating a strong pipeline of opportunities for European Special Situations investors. The outlook for 2025 in Europe is fraught with uncertainty due to economic weakness, political instability, and layoffs in key economies, yet sectors present opportunities.