Oviedo, 15/04/2002 (Agence Europe) - European Finance Ministers observed signs of economic growth for 2002, with economic growth rates touching 1.5% in Europe. At the informal meeting in Oviedo, Ministers also downplayed the impact of fluctuating oil prices. They welcomed t he agreement reached in March with the German government, Länder and borough authorities that should allow Germany to meet its budgetary targets for 2004. The New Portuguese Minister for the Economy, Manuela Ferreira Leite, also addressed the meeting for the first time.
Addressing Sweden and Denmark, Commissioner Solbes declared at the end of the "extended" EUROGROUP meeting on Friday afternoon in the United Kingdom that, "the worst is behind us". Mr Solbes explained that the Commission was expecting 1.5% in 2002, which was a figure relatively similar to that of last year but with a differing trend - 2001 it could be explained by a slowdown - 2002 a period of growth. An annual rate of 2.5%-2.75% would be necessary if last November's forecasts of 3% for 2003 were to be attained, he added, while making an estimate of results for spring which will be announced in two weeks time.
This "slight upturn", commented Mr Solbes, was due to factors such as the recovery in share prices, solutions found in the information technology investment sector, which is backed up by low interest rates and political incentives in the USA, as well as by economic stabilisers in Europe. The President of the Council, Rodrigo Rato, explained that the EU and USA economies were recovering, at the same time as improvement in Japan. Mr Rato warned, nevertheless, of the risks outside the USA with an imbalance situation and trade restrictions and oil price increases.
Speaking in the USA, Mr Solbes stated that the volatility of oil prices had introduced a number of dangers but given that prices remained in the 22-28 a barrel range, fixed by OPEC, these risks could be compensated by other positive factors. Mr Solbes also hoped that producers would continue to act in a "responsible way". A 5 dollar oil per barrel increase would lead to a rise in inflation of 0.5%, he added. Mr Rato explained that if oil prices per barrel remained in the USD 22-28 band, there shouldn't be any problems. He also thought that recent news from Venezuela would not have a major impact in the sector.
Mr Rato was keen to point out that wage restraint and labour market flexibility were necessary, as outlined in the Barcelona Summit reforms. He wouldn't comment on recent wage negotiations in Germany but did point out that there was a "common position" among governments and that salaries must remain within a stable framework. Mr Solbes also pointed out that wages had to be determined by productivity.
Ministers heard the "important news" sent by Minister Hans Eichel (absent from the EUROGROUP meeting), on the agreement reached between the German government, Länder and boroughs on 21 March, which, according to Rodrigo Rato, would allow Germany to meet the commitments it had made at the ECOFIN Council last February. This agreement means that the 16 Länder (accused of being responsible for the 2001 budget deficit of 2.7% in Germany) must cut their spending by 1% in 2003 and 2004 and that the Federal government reduces spending by 0.5% over the same period.
Mr Rato explained that they had welcomed their Portuguese colleague, who had been outlining his government's objectives, by insisting that stability be maintained. Ms Ferreira Leite is expected to clarify the policy of the new government during the ECOFIN Council in May, after the presentation of its plan to the Portuguese Parliament. Last week Ms Ferreira declared that the Portuguese deficit could be very clearly under the 3% GDP level for 2001, as opposed to the 2.6% figure announced by her Socialist predecessor. Commissioner Solbes pointed out that technical contacts existed between the Commission and the Portuguese government, which indicated that the deficit in Portugal had increased but that they weren't overly concerned. It was greater than expected but remained under the 3% threshold, he added.