EU finance ministers meet in Brussels today amid fresh signs of economic recovery in the euro-zone. The Reuters Purchasing Managers' Index (PMI) showed its second consecutive monthly rise in May and reached its highest level since February 2001.
The survey of 2,500 manufacturers showed growth fastest in Ireland, Greece and Spain while Germany, the euro-zone's biggest economy, remained sluggish.
The modest rise in the PMI to 51.5 is unlikely to influence the European Central Bank's governing council when it meets in Frankfurt on Thursday. The ECB is expected to leave interest rates at their present level of 3.25 per cent, despite recent warnings that high oil prices were driving up inflation.
The appreciation of the euro against the dollar is likely to dampen inflation as the price of imports drops.
The ECB favours a strong euro but some EU governments fear that too steep a rise could cripple exports and strangle economic growth.
The finance ministers are expected to discuss the euro's exchange rate today but they are unlikely to make a public statement about it.
They are also expected to postpone a discussion of the Broad Economic Policy Guidelines that are due to be adopted formally by EU leaders in Seville later this month.
With a French general election looming on Sunday, the finance ministers wish to spare France the embarrassment of restating its commitment to bring its budget close to balance by 2004.
President Jacques Chirac, who hopes to secure a centre-right majority in the National Assembly, has made the promise of tax cuts a central plank in his campaign.
The European Commission and the ECB president, Mr Wim Duisenberg, have stressed that France must live up to its commitments and Paris is likely to come under renewed pressure after the elections.
The ministers are now expected to discuss the Broad Economic Policy Guidelines when they meet in Seville on the eve of the summit.
US manufacturing also continued its recovery from recession last month, keeping the broader economy on track for solid growth in the first half of the year.
The Institute of Supply Management said its closely-watched purchasing managers' index of manufacturing activity reached 55.7 in May, up from 53.9 in April, and its highest level since February 2000.
The index, a composite of purchasing managers' surveys on orders, exports, employment, prices and other variables, has been pointing upwards since February, when the manufacturing sector pulled out of a recession that was much longer and deeper than that of the economy as a whole.
The figures, together with a report yesterday from the Commerce Department that said construction spending rose by 0.2 per cent in April from a month earlier, will refresh hopes that the US economy's fragile recovery will prove sustainable.
Fears about the durability of the US recovery - together with continuing question marks over the reliability of corporate accounts - have kept stock prices depressed in recent weeks.
They have also dampened investors' expectations for any early increases in short-term interest rates by the Federal Reserve, which is not now expected to tighten policy before August at the earliest.
