European Commission likely to cut 2003 growth forecast

THE European Commission said yesterday it was likely to cut its euro zone growth forecast for 2003 from the current 1.8% due to pressures from a slower than expected pick up and geo-political uncertainty.

A cloud of worries due to a possible war with Iraq has hung over the economy of the euro zone and the wider EU, likely to force changes to Commission forecasts made late last year.

“Since our November forecasts downside risks have materialised, so I think we are looking for a downward revision but we have to come up with the new figures,” Commission Economic and Monetary Affairs spokesman Gerassimos Thomas told a news conference.

He was speaking before a meeting of euro zone finance ministers, but said he did not think a new forecast would be made at those talks.

Thomas also said ministers would discuss the geo-political uncertainty created by fears of a war.

“One cannot easily embark on scenarios of what will or not happen. For the moment ministers have focused on managing matters (in the economy) as best they could...given these uncertainties that are around,” he added.

He said that any response by governments would have to be in the framework of current policy, meaning that the EU’s budget rules would have to respected.

As war fears mount, speculation has increased that conflict could be one reason for states to have more leeway in respecting those rules.

German Chancellor Gerhard Schroeder said in a magazine interview last week that Germany could again break the EU deficit cap of 3% of GDP if war broke out.