Eurozone growth in 2003 will be less than 1.8 percent

Brussels – The eurozone will grow more slowly in 2003 than initial European Commission forecasts indicated, it emerged yesterday. The European commissioner for economic and monetary affairs, Pedro Solbes, said yesterday, after the end of a two-day meeting of the European Union’s Council of Finance Ministers (Ecofin), that a forecast for 1.8 percent growth of the eurozone’s gross domestic product (GDP) was «very optimistic.» In 2002, the eurozone GDP grew by an anemic 0.9 percent. Greece, helped by EU aid and undergoing a construction boom prior to the 2004 Athens Olympics, was the fastest-growing country in the eurozone, topping all the advanced economies in the world for the first time: Preliminary estimates put its growth at 4 percent. As Solbes said, the uncertainty over a possible war in Iraq is undermining an already weak economic climate. Countering objections from France and Germany, Solbes said the current situation called for no deviation from the guidelines of the Stability and Growth Pact, which mandate that no eurozone member post a budget deficit greater than 3 percent of GDP and call for member countries to strive to balance their budgets by 2006, at the latest. Solbes also called for an acceleration of economic reforms. «We agreed that the Stability and Growth Pact and the (Commission’s) General Economic Policy Guidelines are adequate as a framework (for conducting economic policy) and they do not require major changes, either in the essentials or in the procedure followed,» Economy and Finance Minister Nikos Christodoulakis, Ecofin’s president, said after the meeting. Several economists, and the finance ministers of France and Germany, consider the Stability and Growth Pact’s guidelines too restrictive and call for an expansionary policy to accelerate economic growth. Ecofin apparently ignored these calls and yesterday warned the United Kingdom to continue its effort to reduce its deficit to zero «in the medium term.» Late last year, Solbes had said that, since the UK had one of the lowest public debt-to-GDP ratios, it would be allowed, exceptionally, to post an excessive budget deficit in 2003. Ecofin yesterday called on Britain not to exceed the 3 percent deficit limit, although it said none of the sanctions contained in the Stability Pact would be triggered if it exceeded it. Ecofin also discussed the operations of the Eurogroup, the collection of the 12 eurozone member countries. no decision was taken, but, Christodoulakis said, there were proposals regarding its separate functioning, such as endowing it with a two-year presidency. At present, only three of the EU’s 15 countries – Denmark, Sweden and the UK – are not part of the eurozone. This will change in 2004, with the accession of ten new members, only three of which – Cyprus, Malta and Slovenia – have a legitimate chance of joining the eurozone anytime soon.