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Euro economy ends 2005 poorly, brave face for ’06

European Union finance ministers acknowledged on February 14, 2006 that their economy lost steam in late 2005 as German growth juddered to a halt, but they clung to hope of a long-awaited acceleration this year.

As they met in Brussels, Berlin announced that its economy did not grow at all in the final three months of last year, bad news on the heels of an official report February 10, 2006 that showed France was close to stagnation too. Jean-Claude Juncker, who chaired the previous day’s meeting of euro zone ministers, said fourth-quarter economic output would also fall short of forecasts for the single currency zone as a whole, and oil prices presented a renewed risk.

Figures issued on February 10 showed French GDP rose just 0.2% in the fourth quarter compared with the previous three months, far less than the 0.7% of the third quarter.

Growth in the euro zone was so far believed to have slipped to about 1.3% for 2005 from 2.1 in 2004 and is currently forecast by the European Commission to hit at least 1.9%, perhaps even 2.2%, in 2006. European Economic and Monetary Affairs Commissioner Joaquin Almunia said he remained ‘cautiously optimistic’ about prospects for recovery despite poor figures from France and Germany.

But Juncker sounded more cautious than optimistic, saying recovery should show through in 2006 without saying how soon, and he highlighted the risk from high oil prices due to increased tension in the Middle East.



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