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Eurozoneâ€™s growth rate to hit 2.6%

19 January 2007 17:21 (UTC +04:00)

The European Commission expects Europeâ€™s economy to ``remain strongâ€™â€™ in coming months and inflationary pressures to be eased by the drop in oil prices and the euroâ€™s strength, a confidential draft document shows.
While Germanyâ€™s sales-tax increase on Jan. 1 could ``take its tollâ€™â€™ on euro-area growth, ``economic activity will remain strong in early 2007,â€™â€™ according to the document obtained by Bloomberg News. At the same time, ``falling oil prices and an appreciating euro should alleviate price pressures in the near term.â€™â€™
The European Central Bank has signaled it would raise borrowing costs in March for a seventh time since late 2005 to keep inflation in check. ECB President Jean-Claude Trichet said Jan. 11 that investorsâ€™ expectations for a March increase may be justified, as the pace of growth gives companies room to raise prices and employees leeway to seek more pay.
European Union Monetary Affairs Commissioner Joaquin Almunia said yesterday in Madrid that growth in the euro region this year will come close to 2006â€™s estimated pace of 2.6 percent, the highest in six years, suggesting the economy can withstand further interest-rate increases. Last yearâ€™s growth rate was 2.6 percent ``if not more,â€™â€™ he said.
``Despite the ongoing withdrawal of monetary stimulus, global financial conditions have remained conducive to growth,â€™â€™ according to the commission document, to be discussed at the Jan. 29-30 finance ministersâ€™ meeting in Brussels. /APA/