Slow growth this year, but 2 pct in 2004

VOULIAGMENI – The eurozone is expected to grow by 1 percent this year as the lack of consumer and investor confidence is seen as hindering a recovery, the president of the eurogroup of finance ministers said at a group meeting yesterday. Greek Finance Minister Nikos Christodoulakis, whose country holds the rotating EU presidency, said, «The lack of confidence is a major obstacle in the path to recovery.» A recent European Commission survey on consumer and business confidence shows a deterioration in the runup to the war in Iraq, continuing a trend of the past six months. Christodoulakis said that although signs of a rally have to yet materialize, ministers «do not expect a recession» as they estimated the region’s growth will expand by around 1 percent this year, a slight improvement from the 0.8 percent recorded in 2002. The finance ministers issued a more optimistic forecast for 2004, projecting growth of more than 2 percent. The upbeat scenario is based on more jobs created next year, an investment recovery and a more supportive international environment, said Economic and Monetary Affairs Commissioner Pedro Solbes. On Tuesday the European Commission is due to present both the baseline scenario and a worst-case scenario, which will take into account the war in Iraq lasting into the year’s second half and the fallout on confidence, equity markets, international trade and tourism. Christodoulakis stressed the need for structural reforms in labor, capital and product markets to boost economic growth and restore consumer and investor confidence. «We need the strongest possible link between macroeconomic and structural policies and this is provided by the reaffirmation of the stability and growth pact on the one hand and a new momentum of the Lisbon process,» he said. He also expressed his concerns over price hikes stemming from rising oil prices and the widening inflation differentials between the eurozone countries. On the euro’s appreciation, he said the current rate reflected the region’s economic fundamentals.