Brussels, 27/03/2007 (Agence Europe) - There is still every reason to be optimistic about the economy of the eurozone, said the finance ministers of the 13 member states of the Eurogroup, noting that there did not appear to have been any negative impact from the stock market downward revisions of late February. “We think that, despite this movement on the financial markets, we have no reason to be worried,” said Jean-Claude Juncker after the meeting of the Eurogroup, which he chairs, and he went on, “economic growth in the euro area remains strong in the short- and medium-term, and is beginning to extend to all sectors”. Economic and Financial Affairs Commissioner Joaquin Almunia also thought that the stock market revisions of the last few weeks had not hitherto had any negative effect on European economies. The Commission's scenario, presented in its February mid-term economic forecast (see EUROPE 9368) remained unchanged and “we continue to see things in a very optimistic light”. Although there were some downward risks which had not been taken into account, the basic scenario was backed up by indicators showing that internal activity was strengthening, Mr Almunia said. The commission expects rises in GDP of 2.4% for the eurozone and 2.7% for the EU27 (compared with the previous 2.1% and 2.4% respectively).
“The volatility of the markets is not sufficient reason to revise our scenarios on the development of the economy of the euro area,” Mr Juncker said. Ahead of the Spring meetings of the International Monetary Fund (IMF) and the World Bank (in Washington on 14-15 April), he also set out the ministers' position on exchange rates. Mr Juncker, who is the prime minister and finance minister of Luxembourg, said simply that what the eurozone had said at the G7 meeting in Essen (see EUROPE 9364) would be repeated in Washington, indicating that he thought the message had been “fully understood” by financial markets. “We have nothing further to add,” he said, going on that there was “nothing new in global imbalances and nothing new on the relation between the euro and the yen”. In February, the G7 highlighted the risks posed by the Chinese yuan, reserving its calls for vigilance on the Japanese currency until the press conference.
The Eurogroup also debated the budgetary situation in the various member states, approving the decision on the Belgian and Spanish stability programmes (see EUROPE 9381), which was put to the Council on Tuesday. These two countries had enjoyed “satisfactory” development over the last few years, Mr Juncker said. Belgium had redressed its public finances “in remarkable fashion”, even though one could see that some measures were not sufficiently structural. Public finances in Spain at the start of the 90s were not completely presentable, but policies put in place meant that today full marks could be awarded. With member states preparing to submit their 2006 results to the Commission, the figures are likely to be better than expected, so that the issue of use of budget surpluses now came into play, Mr Juncker said. Mr Almunia was pleased to state that, on the basis of the stability programmes examined (only Austria's has not been analysed by the Commission), budget consolidation in structural terms had yielded very good results. Last year, there was budgetary adjustment of 0.7% of GDP, but, with no new measures, it will only be 0.4% in 2007, below the 0.5% set out in the stability and growth pact. “Ministers have agreed on the need to increase their efforts to follow more detailed strategies and take advantage of boom times,” Mr Almunia stressed. He went on, “We must not repeat past errors”, but “accelerate budget consolidation”. This warning, it seems, was well received by the ministers, who, according to Mr Juncker, agreed to achieve budgetary consolidation in 2007 and 2008 over 0.5% of GDP.
When asked about action taken after last month's debate on redistributing the fruits of growth (see EUROPE 9375), “the issue was debated once again today because several of us believe that this is a subject which must be debated,” said Mr Juncker, reiterating his position. On the one hand, wage increases do not present any problems if they follow on from improvements in productivity, and, on the other, there are other ways in which wage earners can enjoy the benefits of growth. A possibility which is more of a necessity, Mr Juncker said, and he predicted that “There will soon be a major debate in Europe” on this issue, with company profits rising at a sometimes frenetic rate and wage restraint, sometimes applied rigorously, being demanded of workers. (ab)