On 16 February 2007, the Commission raised its economic forecasts for EU growth to 2.7% and 2.4 in the eurozone. The report says that EU growth was mainly driven by domestic "demand thanks to an improved labour market situation". This has also allowed the EU economy to weather energy prices.
Meanwhile, inflation is declining from 2.2% in 2006 to a predicted 1.8% in 2007, thanks to lower oil prices and the limited impact of the German VAT hike.
Amid the positive outlook, Economic and Monetary Affairs Commissioner Joaquín Almunia warned governments not to repeat past mistakes and to "make use of these good economic times to pursue on the road of sound public finances and structural reforms".
The Commission urged that the "turnaround in the labour market could lead to a virtuous circle of rising labour incomes", but also warned that an "acceleration of wages" could lead to a rise in interest rates by the European Central Bank (ECB).
The issue of global economic imbalances remains a concern for the Commission.
In the meantime, EU trade deficit in 2006 is at €8.2 billion for the eurozone (it reached this level in 2006, compared with a surplus of €16.2 billion in 2005) and €172.6 billion for the EU25 countries, according to Eurostat.
