The European Commission (EC) trimmed its economic growth forecast, said risks to the recovery are mounting and warned that six of the 12 countries using the euro will break budget-deficit rules in 2004.
Germany, France, Italy, the Netherlands, Portugal and Greece—representing 80 percent of the $8.5 trillion euro economy—will surpass the deficit limit of 3 percent of gross domestic product, the Brussels-based commission said.
Governments are struggling to control their budget gaps after growth slowed to a 10-year low of 0.4 percent in 2003. The commission pared its forecast for 2004 to 1.7 percent from 1.8 percent and said "the balance of risks appears to have shifted toward the downside in recent months."
``We have to acknowledge the hard truth that the EU economy is not participating fully in the positive global economic performance,'' Monetary Affairs Commissioner Pedro Solbes said. He forecast U.S. growth of 4.2 percent in 2004, outstripping the euro region for the 11th time in 12 years. Japan's growth of 3.4 percent will beat Europe's for the second year, Solbes said.
With European interest rates at half-century lows, the commission said the European Central Bank's monetary policy is ``accommodative,'' indicating that there is little prospect of lower borrowing costs, increased government spending or tax cuts boosting the economy.
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