European Commission report on economy: optimistic

The EU Commission has produced an optimistic report on the economy of the European Union. Considering the impact of the economic slow-down in the USA as “limited”, the report states that the setting is “optimistic” with clear signs of a healthy growth in employment rates. Average Gross Domestic Product (GDP) is set at 2.8% for 2001 and 2.9% for the following year. Inflation is set to fall from 2.1% to 1.8% in the same period. The European Central Bank is not expected to lower interest rates, fixed at 4.75% since October, 2000. “Prudence” is the word of the day for some analysts, who state that the ECB pays “exaggerated attention to inflation rates”. For others, the ECB is being too stubborn and inflexible, worrying more about public opinion than about real economic policies. “It would be considered as lax to reduce interest rates, despite the fact that the inflation rate is over 2%”, said a spokesman from the Portuguese banking sector. Unemployment is set to fall from 7.7% to 7.2%. The impact of the economic downturn in the USA is considered as being of “limited impact” for the EU, according to the European Commission. The European Commissioner for Economic and Monetary Affairs, Pedro Solbes, stated that “The European economy was confronted with a sharp slowdown in the USA, but this impact should be limited, thanks to the strong internal consumption” inside the Union. It is predicted that over the next two years, 3.9 million new jobs will be created, although the worst affected countries will continue to be Spain and Greece (11.9% for Spain and 9.9% for Greece in 2002). On a more negative note, the budget is expected to pass from a surplus of 1.2% in 2000 to a deficit of 0.2% for 2001, but is expected to be balanced next year.