EU minister upbeat about eurozone recovery

9th December 2005, Comments 0 comments

PARIS, Dec 9 (AFP) - The eurozone economy will end the year with a growth rate of about two percent, auguring well for 2006, EU Economic and Monetary Affairs Commissioner Joaquin Almunia said on Friday.

PARIS, Dec 9 (AFP) - The eurozone economy will end the year with a growth rate of about two percent, auguring well for 2006, EU Economic and Monetary Affairs Commissioner Joaquin Almunia said on Friday.

Almunia also expressed doubts that France would respect an undertaking to reduce its overspending to a maximum of three percent of output this year.

He told the newspaper Les Echos: "The economic situation of the eurozone is improving. Several signals show that the recovery is real, not yet established but real."

He said: "We are going to end the year 2005 with a rate of growth of about two percent which provides a good outlook for 2006."

But Almunia said that problem was that two percent was the maximum theoretical growth achievable in the zone without provoking inflation. To raise this potential growth figure "we must continue structural reforms".

On Thursday, official data in Germany, the biggest economy in the eurozone, showed that industrial production had risen by 1.1 percent in October after an increase of 1.5 percent in September.

In contrast, industrial production in France fell by 2.5 percent in October, official data showed on Friday. However, part of the decline might be the result of variations in the number of working days in a month.

The European Commission has forecast that the 12-nation eurozone economy will show growth of 1.3 percent for 2005, 1.9 percent in 2006 and 2.1 percent in 2007.

Almunia also said that he expected the French public deficit to amount to 3.2 percent of gross domestic product in 2005 and that he still had to be convinced by France that it was able to meet a commitment to reduce the deficit to the EU limit of three percent of output.

Almunia said that a deficit of 3.2 percent still put France at risk of an EU procedure for running an excessive deficit.

Almunia, referring to a promise by French Finance Minister Thierry Breton that the deficit would not exceed three percent of output this year, said that Breton had noted that growth in the third quarter had been strong.

However, growth for the beginning of the year had been revised downwards slightly, Almunia also said.

Almunia said that over the long term, EU statistics had been shown to be more reliable than those provided by member states.

Almunia said that when he had an estimate for the French public deficit for 2006, in the middle of January, it would be possible to see whether an excessive deficit procedure should be begun against France.

The EU public deficit criteria cover central government, social security and local authority budgets.

Copyright AFP

Subject: French news

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