ECONOMY

EU Commission is seen raising its 2006 forecast for growth in eurozone

BRUSSELS (Reuters) – The European Commission will raise tomorrow its 2006 economic growth forecast for the eurozone and urge European Union members to use the economic upswing to improve public finances, an EU source said. Economic and Monetary Affairs Commissioner Joaquin Almunia will present tomorrow the EU executive’s interim forecasts for gross domestic product growth and inflation for the 12-member eurozone. It will also issue growth and inflation forecasts for Germany, France, Britain, Italy, Spain and Poland. «The commissioner is expected to increase the growth forecast for this year,» the source said. The Commission previously forecast eurozone growth this year at 2.1 percent, up from 1.3 percent in 2005. The European Central Bank raised its own forecast for eurozone growth last week to a mid-point of 2.5 percent, from 2.1 percent. The economy in the 12 countries using the euro grew by 0.8 percent in the first quarter against the previous three months, and by 0.9 percent in the second quarter, according to the EU’s statistics office. The Commission expects it to expand by around 0.7 percent in the third quarter and 0.65 percent in the fourth. Such quarterly expansion would give a full-year growth figure of 2.6 percent, said Ken Wattret, economist at BNP Paribas. Almunia will also remind member states tomorrow that they should use the better growth to boost efforts to consolidate public finances, because such attempts would be less painful, the source said. Almunia addressed a similar call to Italy last week in response to Rome’s intention to trim initially planned spending cuts next year by 5 billion euros to 30 billion.