The European Commission today voiced hope for a stronger-than-expected recovery in Europe this year, forecasting accelerating growth in the 12-nation euro zone despite soaring oil prices.
In a quarterly report, the European Union's executive arm said the euro zone economy is 'growing at one of the most robust paces since the beginning of the decade'.
This creates 'an environment potentially capable of weathering the negative effects of high oil prices, recent stock market turbulence and the appreciation of the euro,' it noted.
'Continued improvements in business and consumer confidence in recent months suggest that the upswing could surprise on the upside in the next quarters,' it added.
Although the US and Europe's key Asian trading partners are powering ahead, the 25-nation EU has struggled to pull out of a prolonged economic slowdown. The Brussels report cited no new figures, but earlier this month the EU executive forecast growth for the second and third quarters of 2006 of between 0.5-0.9%, and in the fourth quarter between 0.4-1%.
It noted that first quarter growth had edged up to 0.6%, while underlying growth momentum, as measured by the year-on-year growth rate, stands at 1.9% - the second-best reading since the beginning of 2001.
The optimism voiced in the quarterly report was echoed by a rise in the EU's Economic Sentiment Indicator, which rose to its highest level since early 2001, at 108.8 points for the 25-nation EU and 107.2 points for the euro zone.
But the commission warned that growth in Europe next year could be more tempered. 'The risks to growth appear greater and more tilted to the downside for 2007,' it said, noting in particular that 'oil price increases above those already assumed cannot be ruled out.'
The upbeat report came as new EU data indicated that euro zone inflation remains higher than EU monetary authorities would like.
Meanwhile, an initial estimate shows that the euro zone's annual inflation rate remained stable at 2.5% in June, after edging up to the seven-month high the previous month. The figures came from EU data agency Eurostat.
The rate for price growth in the area remains above the European Central Bank's preferred level of close to but less than 2%.
The ECB has raised interest rates three times in six months, including a quarter point hike earlier this month to 2.75%, in a bid to keep a lid on inflation.
