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EU says eurozone economic prospects most favorable in many years

The prospects for continued economic growth in the eurozone are more favorable in 2007 than they have been for many years, the European Commission said Thursday.

Though the European Union's executive arm did not provide an estimate for this year's economic growth rate, it has indicated that it will raise its current official forecast of 2.4%, which may come out next Monday. The commission's positive attitude was based on strong domestic demand and exports which serve as the drivers of economic growth in the eurozone. „Domestic demand is expected to maintain its relatively strong momentum ... global economic growth is likely to moderate somewhat but euro area exports are well placed to continue their strong performance,” the commission said in its annual statement on the eurozone. Since last year, eurozone economic recovery has gone from strength to strength, driven by buoyant domestic demand and exports. The eurozone grew by 2.7% last year, its fastest growth rate since 2000, and well above its long-term average.

„Domestic demand is an important driver of economic growth in the euro area,” the statement said, adding, „euro area exports also made a positive contribution to growth despite less favorable economic conditions in some of its key trading partners and the appreciation of the euro.” Employment growth accelerated to around 1.5% in 2006 in the euro area, yielding an increase of close to 2 million jobs. Inflation remained at around 2% in 2006 but it came down toward the year's end as energy prices eased. „The euro area's positive growth performance partly reflects the current cyclical upturn but it may also show that structural reforms are beginning to take effect,” the commission said. (