EU growth rates outpace the US

THE annual growth forecast for the EU has been upgraded by the European Commission to 2.3% following better than expected results during the first half of this year and despite the 80% increase in oil prices over the past 18 months.

The growth, the best since 2000, is based on strong demand from within the EU with growing private investment and on good consumer growth so it should withstand any slowing down of the US economy.

For the first time since 2001, the EU’s growth outpaced that of the US, but maintaining this positive trend depends on business and industry not passing on the full effects of oil increases and on moderate wage increases. Outlining his analysis Economic and Monetary Affairs Commissioner, Joaquin Almunia, said reforms undertaken by member countries were showing results in increased growth.

But he warned, “Let’s use these good times to press ahead with further structural reforms and budgetary consolidation. Only this way will we be able to increase the growth potential where it is low and manage the necessary safety margin for when the going gets rough.”

Economic growth will reach 2.7% in the EU overall up from 1.6% in 2005.

But the OECD predicts the upturn will lose momentum towards the end of 2006 and economic growth will be around 2% as a result of Germany and Italy raising taxes next year.