- The Washington Times - Monday, March 17, 2003

BRUSSELS, Belgium, March 17 (UPI) — A prolonged war in Iraq could dampen Europe's growth prospects and even lead to recession, a leading business group said Monday. But a quick victory against Iraqi leader Saddam Hussein could actually bolster the European economy.

Business federations from the 15 European Union member nations represented by the Unice group forecast gross domestic product growth of 1.4 percent this year.

"The Unice index of business climate is unremittingly grim as European business is still confronted with a squeeze on profits and an economic future riddled with uncertainties, forcing companies to further postpone investments," the body stated in its semi-annual report on the EU economic outlook.

The organization estimates the unemployment rate at 7.9 percent and inflation at 2.1 percent.

"In Germany in particular, economic conditions are persistently gloomy, and a new recession cannot be ruled out, which is a cause for concern in many smaller neighboring member states and indeed the whole European economy," Unice added.

But while war jitters and weak consumer sentiment are dragging down growth prospects, particularly in the near term, the group said that the problems were more fundamental: unemployment, the inability to carry out sweeping structural reform and uncertainty in the fiscal outlook.

Those factors "play a more important part in keeping European domestic demand paralyzed than geopolitical uncertainties," Unice said.

The group said that a quick, decisive war against Saddam would boost European business growth. But it cautioned that a prolonged war in the Middle East, resulting in a surge in oil prices, could prompt a slump in financial markets and a potential recession.

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