3rd Dec 2022

Euro zone could outstrip US by 2010

A new report by the world's largest financial services firm, PricewaterhouseCoopers (PwC), projects that the Eurozone economy could grow faster than the US by 2010.

PwC's European Economic Outlook - published today - concludes that although growth in the Eurozone is likely to remain sluggish in the next two years, there is "the potential to achieve faster GDP per capita growth than the US over the rest of this decade".

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  • The EU can catch up with the US ... but only after "urgent reforms". (Photo: EUobserver)

The projection will give a much needed boost to advocates of the "Lisbon process", which aims to make the EU the "most competitive economy in the world by 2010". Critics have long held that Europe is unlikely ever to outpace the US.

But there is a catch.

The report goes on to say, "however, this can only happen if the Euroland countries make effective reforms in areas such as pensions and labour markets".

There are some signs that the reform process is moving forward in Germany, but reforms to pensions remain highly controversial - as the Prime Ministers of France and Italy have found.

And not only does the Euro zone have to get its act together to outpace the US, the US also has to experience economic instability itself.

Reforms \"urgently needed\"

PwC's message was reinforced by the European Central Bank (ECB) this afternoon. At ECB President Wim Duisenberg's last interest rate meeting - rates were left on hold - he said that he was confident that the Eurozone is beginning to recover.

He said that recent economic activity has been slightly better than expected and that "this upturn should gradually strengthen in the course of 2004".

But the ECB, too, stressed the need for reform.

Mr Duisenberg said he was perhaps stating the obvious, but declared, "more reforms are urgently needed to reduce structural rigidities in labour and goods markets so as to address the main economic problem of the euro area, namely the high level of structural unemployment".

ECB says more rate hikes to come

European Central Bank president Christine Lagarde said more rate hikes will come, but also admitted a recession will not lower inflation — leaving some economist question the logic of the policy.

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