Duisenberg: Euro-Zone Growth May Reach 2.5% By Year's End

By Agence France-Presse European Central Bank (ECB) President Wim Duisenberg expressed confidence July 2 that euro-zone growth would recover to a rate of 2% to 2.5% by the end of this year. Presenting the ECB's annual report to the European Union parliament in Strasbourg, France, Duisenberg said he saw euro-zone growth accelerating to reach its non-inflationary potential "later this year," but he also warned some countries about their deficits and fiscal policies. The ECB put non-inflationary potential growth rate in the 12-state euro zone at 2% to 2.5%. Duisenberg also said the outlook for price stability in the euro zone was "less benign" than it had been in November 2001 when the ECB last cut interest rates. He played down the effect on inflation of the launch of euro cash on Jan. 1, 2002, commenting that, although residual concerns remained about "some upward price adjustments" attributable to the currency changeover, the impact had been contained. Furthermore, developments in the value of the euro should ease inflationary pressures, he said. Duisenberg urged countries still running public deficits to "respect" their commitments under the Stability and Growth Pact and head for balanced, or nearly balanced, public finances in 2003 or 2004. Four of the 12 euro-zone countries are running such deficits: France, Germany, Italy and Portugal. Both France and Portugal recently have admitted their budget deficits this year will exceed targets set in the EU's Stability and Growth Pact. The ECB is due to meet on July 5 to decide the level of its main interest rates, with economists expecting it to leave rates unchanged. Copyright Agence France-Presse, 2002