Europe still upbeat about recovery prospects

14th February 2006, Comments 0 comments

BRUSSELS, Feb 13, 2006 (AFP) - European Union finance chiefs voiced optimism Monday on prospects for Europe's fragile recovery, despite disappointing growth forecasts in recent months.

BRUSSELS, Feb 13, 2006 (AFP) - European Union finance chiefs voiced optimism Monday on prospects for Europe's fragile recovery, despite disappointing growth forecasts in recent months.

Meanwhile the head of the 12-nation bloc which shares Europe's single currency said he was sure the European Central Bank will take a "responsible" decision on interest rates, widely expected to rise again next month.

"I think conditions for a continuing upswing are very favourable," said Austrian Finance Minister Karl-Heinz Grasser, whose country holds the rotating EU presidency, as he arrived for regular talks with his eurogroup counterparts.

The EU has been struggling for some time to accelerate recovery from a prolonged slowdown. Last month, the commission said it expects eurozone gross domestic product (GDP) to grow by between 0.4 and 0.8 percent in the fourth quarter of last year and the first quarter of this year.

"We maintain our forecast of growth in 2006, even if there is a difference between our estimates and what we see," said French Finance Minister Thierry Breton after the talks.

EU monetary affairs commissioner Joaquin Almunia said the commission is "moderately optimistic" about the eurozone's growth performance early this year.

"For the fourth quarter of 2005 we will maintain more or less our previous estimate but I continue to be moderately optimistic for the first part of 2006," he said.

Dutch Finance Minister Gerrit Zalm echoed the comments, saying the latest growth data was "very positive," notably as regards consumer and business confidence.

"The current eurozone indicators are not bad," said Belgium's Didier Reynders, more cautiously.

Soaring oil prices continue to cast a cloud over economic growth, both in Europe and worldwide.

But Almunia, speaking on his way into the EU talks in Brussels, said he does not expect a further large rise in oil prices, although they remain a risk to the recovery.

High oil prices concern eurozone policymakers not only because they stunt growth but also because they fuel inflation.

The European Central Bank raised its benchmark interest rate by a quarter percentage point in December to 2.25 percent to keep inflation in check despite criticism from some EU capitals that that would hurt still fragile growth.

But with many economists forecasting another rate hike in March, the ministers are being careful not to be too outspoken in their criticism of the ECB as not to tempt the Frankfurt-based central bank to assert its independence from them with further increases.

Eurogroup chief Jean-Claude Juncker, the prime minister of Luxembourg, was cautious when asked of his expectations for an ECB decision next month.

"I am convinced that the ECB will take a responsible decision," he told reporters.

The latest estimates of GDP growth in the 25-nation EU and the 12-nation eurogroup of countries sharing Europe's single currency are due to be published on Tuesday.

Eurogroup ministers met Monday evening ahead of talks for the full EU meeting on Tuesday.

Copyright AFP

Subject: French news

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