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EU Reports Zero Economic Growth Rate - 2003-05-15

There is more news of a slow economy in Europe. For the first time in almost two years, the European Union has reported a zero growth rate for a three-month period.

The estimate comes from the EU's statistics agency, Eurostat, which is based in Luxembourg. It covers the first quarter of this year, and is based on information from seven of the EU's 15 countries, including the largest economies of Britain, Germany, France, Italy, and Spain.

This is the latest of several indicators, including rising unemployment, that paint a gloomy picture for the European economy. But EU economics spokesman Gerassimsos Thomas played down the report.

"The data is slightly disappointing and slightly surprising," he said. "There was expectation that GDP in the first quarter was going to grow by 0.1 percent."

Mr. Thomas blamed the zero growth estimate on the Iraq conflict, but also said the quick end to the war should help the European economy come back in the second half of this year. He says this would meet the EU's forecast of one percent growth for the whole year.

A similar theme is taken by economist Ferdy Adam of Statec, the Luxembourg government's statistics agency.

"The economy is not worse today than yesterday, with this new figure," he said. "The first half of the year is a very difficult period, after a few quarters of better growth last year. Everybody knew that the first two quarters would be more difficult."

Economists say the falling growth rate is putting pressure on the European Central Bank to cut interest rates next month in an effort to boost the economy by making it cheaper to borrow money.

The rising euro, which has hit four-year highs, is also putting stress on the European economy because it makes European exports more costly. The euro is used by 12 west European nations. The British government said Thursday it will announce on June 9 whether it will press to join the euro system, but it is not expected to do so.

All this comes against the background of a new report released by the French Institute of International Relations, called World Trade in the 21st century. It says, by 2030, Europe's share of the world economy will be only 12 percent, about half what it is today. The report says the world's economic leaders in the coming decades will be North America and what it calls greater China, which includes Taiwan.