Brussels, 21/08/2001 (Agence Europe) - In a working document published by the Directorate General for Studies at the European Parliament on the economic situation in the European Union and prospects for 2000-2001, the EUROFRAME Group predicts that the rate of the euro will rise to $1.06 by the end of 2002. If the rate does not rise within this time, there is a "real danger that the rate of inflation will be clearly higher than forecast, exceeding the ceiling" fixed by the European Central Bank, adds the research group. It believes that, "if the weakening of the economic situation in the euro zone or the euro's appreciation exceed our forecasts, then the ECB would have to make a swift and determined cut in interest rates". The EUROFRAME Group is formed of the economic research institutes WIFO (Austria), ETLA (Finland), OFCE (France), IfW and DIW (Germany), Prometeia (Italy) and NIESR (United Kingdom).
According to these research institutes, the current economic slowdown should not entail recession in the euro zone, and growth will be around 2.8% in 2001 and 1.5% in 2002. Furthermore, the fall in prices and the euro's current appreciation should cause a fall in inflation, to 2.2% in 2001 and to 1.5% in 2202. In their view, "the greatest danger for the euro zone would be a strong deterioration of the business and investment climate in the United States. If the negative trend in the United States were to accelerate sharply, the ECB would have to be ready to make significant cuts in interest rates".
In its very detailed analysis, EUROFRAME also covers: - the new economy, recognising that Europe is "lagging behind the United States" and that greater openness of the telecommunications markets has given substantial impetus to the new technologies in northern countries. The research institutes suggest tax incentives could be used, although these would call for "close monitoring"; - taxation and retirement systems, noting that early retirement must no longer be encouraged but that, "better institutional conditions" should be created to seek a higher rate of employment. This would allow those concerned to remain on the labour market. Furthermore, EUROFRAME insists on social solidarity and considers that, although some feel taxation policy should be under national responsibility, "a certain degree of harmonisation could become necessary so that mobile factors (…) and the multilateral companies are not able to evade taxation"; - the situation in the EU Member States, noting in particular that, in some countries, "including the United Kingdom, the economic situation should be helped along next year by tax measures", but that, "in the medium term, it is necessary to remain vigilant" and strengthen the efforts of budgetary discipline.
(European Parliament, L-2929 Luxembourg. Ben Patterson. Tel.: (353) 4300-24114. Fax: 4300-27721. E-mail: GPATTERSON Internet: gpatterson@europarl.eu.int).