Growth in the eurozone has progressed "slightly faster than expected" and "should continue toexpand at a similar pace throughout the rest of this year," according to a report on Tuesday released by the European Commission in Brussels, the executive arm of the European Union (EU).

Despite this, the Quarterly Report on Euro Area warns "there are no grounds for complacency. The recovery still looks relatively timid."

Economic recovery has mainly been export-led and domestic demand must now take over as the driver of growth in the euro area,said the report.

Presenting the report, Klaus Regling, Director General of the Economic and Monetary Affairs Commission, downplayed the danger ofhigher oil prices, which is hovering around the 50 dollar per barrel mark.

Although he did not expect a rapid decrease in oil prices, Regling said that the euro area is far less dependent on oil than it was during other oil shocks. The increased price of energy, whilst "not helpful," "should not be too dramatic," he declared.

The Commission has analyzed the effect of higher oil prices andconcluded that a rise of 10 dollars per barrel reduces growth by 0.75 percent over the year and increases inflation by 0.6 percent over the year.

But Brussels is sticking to its growth projections of "around two percent" for 2004, despite oil prices being about 12 to 14 dollars higher than expected.

Source: Xinhua