The Economic and Monetary Affairs Commissioner Olli Rehn says the euro zone economy is likely to grow faster than expected this year.
Announcing the European Commission’s twice-yearly interim economic forecasts Rehn credited a stronger global economy and upbeat sentiment in euro zone countries but also warned inflation could rise.
The EU executive expects the euro zone economy to grow 1.6 percent this year compared with 2010. That is up from its 1.5 percent forecast in November.
“While exports should continue supporting the recovery, a rebalancing of growth towards domestic demand is expected for 2011, resulting in more sustainable growth,” Rehn said.
“However, the recovery remains uneven and many member states are going through a difficult phase of adjustment. Moreover, despite the recent relative calm in the financial markets, the situation has not yet fully normalised,” he added.
“Ensuring a stronger recovery calls for an agreement on an ambitious agenda of fiscal consolidation and structural reforms, as outlined in Commission’s Annual Growth Survey,” he said.
The Commission’s Annual Growth Survey lists measures that would improve the single currency’s area’s competitiveness, which include better control of public finances, more flexible labour markets and pension reforms.
The Commission said euro zone inflation, which the European Central Bank wants to keep below, but close to two percent over the medium term, would be 2.2 percent this year, an upward revision from the 1.8 percent that it forecast last November.