- The Washington Times - Friday, March 7, 2003

BRUSSELS, Belgium, March 7 (UPI) — The European Union is in danger of missing its ambitious goal of becoming the world's most competitive economy by the end of the decade, EU finance ministers admitted Friday in a bleak assessment of the bloc's economic health.

As if to underline the gloomy message, the European Central Bank — which manages the finances of the 12-eurozone members — cut its economic growth forecast for 2003 from 1.6 percent to 1 percentage point.

In a bid to boost sluggish growth, the Frankfurt-based bank Thursday shaved interest rates by a quarter of a percentage point to 2.5 percent.

In a paper expected to be endorsed by European leaders later this month, finance ministers confessed: "Economic growth has turned out weaker than anticipated a year ago, and the outlook is clouded by economic uncertainties and global political risks."

The threat of a U.S.-led war against Iraq has dampened consumer and business confidence in Europe and forced EU states to downgrade already paltry growth forecasts.

Finance ministers said the problem was compounded by the slow progress towards meeting the so-called 'Lisbon targets' — a 10-year social and economic reform program agreed by EU leaders in the Portuguese capital in 2000.

"While some progress was achieved during 2002, a delivery gap remains and there is a real danger of losing steam and not reaching the Lisbon targets," ministers said in a statement.

The damning report admits that the 15-member bloc has an "entrepreneurial deficit" and that the potential contribution small businesses can make to growth and employment is "not fully realized."

Among the obstacles noted by finance ministers include: excessive administrative burdens, insufficient investment in research and development, inflexible labor markets and patchy progress in completing the single EU market in goods and services.

Speaking to reporters in Brussels, Greek Finance Minister Nikos Christodoulakis, whose country holds the rotating presidency of the EU, said: "Structural reforms are tools to achieve higher growth levels and we need to step up efforts to implement them."

The European Union took a major step towards stimulating economic growth earlier this week when ministers struck a deal on setting up an EU-wide patent after almost three decades of debate.

However, finance ministers were Friday unable to iron out remaining differences on harmonizing energy duties and savings tax rules — two other issues that have long plagued EU governments.

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