EU Lifts 2010 Growth Forecast

AOIFE WHITE

BRUSSELS (AP) — The European Commission on Tuesday predicted that the EU and eurozone will grow in 2010 at a modest rate of 0.7 percent as the economy moves from a sharp recession to a hesitant and fragile recovery.

The growth forecast was raised from the earlier outlook that the economies would shrink 0.1 percent in 2010.

The EU executive warned however that a "better-than-expected" rebound in the second half of 2009 would likely be followed by slower growth early next year.

High unemployment and the lingering effects of the financial crisis are expected to dampen demand.

The EU sees stronger growth in 2011, predicting that the eurozone would expand by 1.5 percent and the EU by 1.6 percent. It says EU governments should start exit strategies to withdraw economy stimulus programs in 2011.

EU Economy Commissioner Joaquin Almunia warned that the euro would stay at a high value against the dollar over the next two years — which may hold back European exports to the U.S. and other nations by increasing the dollar price of German cars or French champagne.