EU growth sluggish, prospectsgloomy
By Gareth Harding,
UPI Europe Correspondent
BRUSSELS, (UPI) -- The EU's ambitious goalto become the world's most competitive economy by 2010 took asharp knock Wednesday when the European Commission published agloomy report on the bloc's economic prospects.
The commission's third-quarter report onthe euro-zone, which includes all the EU's 15 member states exceptBritain, Denmark and Sweden, said: "Over the summer, growthprospects for the euro-area economy have begun to look less rosy.
The recovery that started in the first quarterof 2002 has failed to gather momentum."
Earlier this year, the commission estimatedthat growth would top 1.4 percent by the end of 2002. The EU executivenow says this target is "out of reach" and that growthis "unlikely to exceed one percent."
But sluggish growth rates are not the onlyproblem for European states as they try to avoid sliding intorecession. Unemployment is on the rise again, stock market valuescontinue to fall and foreign investment in the euro-zone has fallenfor the sixth quarter in a row. The prospect of war with Iraqhas also sent oil prices spiraling.
Commission officials tried to put a braveface on the figures Wednesday.
"It's not all doom and gloom,"said Klaus Regling, head of the body's economics directorate."It's easy to fall into the trap of being too pessimistic."
Regling pointed to falling inflation, lowinterest rates and robust exports as proof that Europe's economywas set for sustained future growth.
However, the commission's surprise decisionTuesday to ease the rules underpinning the euro points to moredeep-seated problems with the European economy.
Under the growth and stability pact, euro-zonestates have a legal obligation to balance their books by 2004.However, with most European economies facing shrinking revenuesand mushrooming welfare bills, the commission has been under intensepressure to slacken the pact's strict rules.
Late Tuesday, the EU's Commissioner forEconomic and Monetary Affairs, Pedro Solbes, announced that euro-zonemembers would only have to meet the close-to-balance target by2006, two years later than originally planned.
This is good news for France, Germany, Italyand Portugal, who were all in danger of missing the 2004 goal.However, the decision will have done little to promote investorconfidence in the world's youngest currency.