Economic growth in the bloc expected to slow to 2% this year – down 0.4 percentage points – as world financial markets grapple with ongoing financial turmoil.
The global economic outlook remains unusually uncertain at the start of 2008. European economies have been weathering the storm fairly well, but lower growth and higher inflation could be on the way, says the latest EU economic forecast.
Europe’s best option is to "maintain the course of structural reforms, sound and stable macroeconomic policies, and to deliver rapidly the follow-up actions to the financial turmoil, as agreed," said EU economic and monetary affairs commissioner Joaquín Almunia.
The outlook for the seven largest EU economies (France, Germany, Italy, the Netherlands, Poland, Spain and the UK) suggests the slow-down will be short-lived – provided there is a rapid upturn in the US economy. Growth is expected to pick up again in the second half of 2008.
Increased food and energy prices have driven the recent rise in inflation – from 2.3% in 2007 to 3.2% in January this year. If these prices taper off, the EU's overall inflation figure should ease back to around 2.5% by the end of 2008.
In a bid to boost growth, the EU is eying the "carbon challenge" as a potential source of new business opportunities. Commission president José Manuel Barroso will join business and political leaders, NGOs, the media and academics at the annual European business summit to share visions and solutions on climate change, energy and eco-innovation.