Brussels, 02/10/2006 (Agence Europe) - The economy of the euro zone is in good health, but there are some long-term risks. The conclusions of the quarterly report on the euro zone, published by the Commission on Monday, confirm the fine results of the first half of this year, when economic activity reached its highest level for the last six years (3.4% annualised rate). Internal demand has bounced back and become the main source of growth, which should remain close to or above its potential, stresses the report, thereby confirming midway forecasts published in September 2006 (see EUROPE 9259). However, as was shown by the equity price turbulence in the spring, risks to growth related to the macro-financial environment have intensified, says the Commission, noting in particular the risk of a sharper than expected slow-down in the world economy. The vulnerability of the euro zone is increased by growing household and corporate debt adds the report. Household debt has gone above 60% of GDP in half the countries of the euro zone and is approaching 100% in Spain, Ireland and the Netherlands.
The report also looks at performances in the euro zone in terms of employment. With more than five million jobs created in five years, the functioning of the labour market has improved substantially, thanks to reforms carried out in several Member States and wage restraint. There remains much to be done, however, to combat structural unemployment and increase employment levels. The report is available on the DG ECFIN web site: http: //ec/economyfinance/publications.quarterly_report_on_the_ euro_area_en.htm