Brussels, 13/05/2004 (Agence Europe) - In the May edition of its monthly bulletin, published on Thursday, the European Central Bank (ECB) considers that the sharp rise in oil prices and the uncertainties relating to budgetary policy could affect the rate of recovery in euro zone economic activity.
Worsening of exchange rates due to the recent rise in prices for oil and other raw materials could cause short term risks (for economic recovery). The uncertainty surrounding budgetary policies and structural reforms in some euro zone countries seem to have contributed to preventing more marked recovery of consumer confidence, one reads in the editorial column of the monthly bulletin. The ECB states that higher prices for raw materials in general, and oil in particular, could threaten price stability.
The ECB Governing Council considers that sources of concern are becoming greater as far as budgetary policies are concerned. It underlines the fact that the latest European Commission forecasts show, on average, the public finances of the euro zone should not improve to any substantial extent in 2004 and 2005. The ECB also notes a growing number of countries will probably present major imbalances and that the efforts being made to improve the budgetary situation may not be equal to the commitments taken. The ECB therefore invites countries concerned to implement credible measures.