Jones Lang LaSalle


Commission Predicts Euro-Zone Economy Will Pick Up in 2006
By JOHN W. MILLER
February 22, 2006; Page A8

BRUSSELS -- The European Commission dismissed bleak fourth-quarter reports from the euro zone's two biggest economies and said the 12-nation currency group's economic growth would pick up in 2006, adding it doesn't expect inflation to be a big concern.

The commission said the euro zone's gross domestic product would grow 1.9% in 2006, up from 1.3% in 2005. By comparison, the U.S. is expected to expand by 3.3% in 2006, down from 3.6% in 2005.

The French government yesterday said its economy had grown 0.2% in the fourth quarter. Germany last week said its economy hadn't grown at all during the last three months of 2005. Nevertheless, European Union Monetary Affairs Commissioner Joaquin Almunia forecast a euro-zone rebound for 2006.

Mr. Almunia's line on growth tracked with that of national and private-sector economists and European Central Bank President Jean-Claude Trichet. But Mr. Almunia's report diverged with the ECB on inflation risks. It projected a continued rise in oil prices but said that wouldn't spur higher inflation, which it pegged to remain at 2.2%. Mr. Trichet on Monday reiterated that risks of rising inflation had "increased," and that analysts were "reasonable" to expect the ECB to raise its base interest rate next week by a quarter point to stave off rising prices.

Mr. Almunia acknowledged several risks to the forecast, including oil prices rising higher than projected, persistent "global current-account imbalances" and volatile exchange rates. But the commission dismissed Germany's flat fourth-quarter number as "a technical correction after the strong growth recorded in the third quarter, rather than a change in the trend." The commission was somewhat less sanguine about France, calling it on track for a "gradual recovery."