The growing belief that a cautious euro-zone recovery is under way was reaffirmed yesterday by the Organisation for Economic Co-operation and Development (OECD).
But the Paris-based organisation warned that risks to growth remained and could jeopardise a sustained upturn.
"Activity is likely to remain subdued in 2003, but could accelerate to... some 2 per cent in 2004," it said in a survey on the 12-state euro zone.
Signs of an economic improvement in recent weeks have eased pressure on the European Central Bank (ECB) to reduce the cost of borrowing further in an attempt to stimulate growth.
The ECB, which maintains interest rates are "appropriate", yesterday kept its key rates unchanged at two percentage points in its last scheduled policy-setting meeting before the summer break.
The bank next meets to consider interest rates on September 4th, and most analysts expect a further rate cut before the year end.
The OECD said yesterday that a possible larger than forecast fall in oil prices and a more rapid easing of global uncertainty could help support domestic demand.
However, the overall outlook remains murky, and the OECD's forecast of 2 per cent growth next year is below the 2.4 per cent projected in April.
Yesterday the organisation cautioned that recovery would "face headwinds" for some time.
These include a possible further appreciation of the euro, uncertainties about the US upswing and risks to consumer confidence as corporate shakeouts continue.
In the US, the biggest surge in defense spending since the Korean War era helped drive US economic growth ahead at a surprisingly brisk 2.4 per cent annual clip in the second quarter, the Commerce Department said yesterday.
