OUTLOOK EU finance ministers to assess economic impact of market rout

OUTLOOK EU finance ministers to assess economic impact of market rout

	Published : Mon, 26 Mar 2007 09:11 By : Agencies Print this Story

BRUSSELS (AFX) - EU finance ministers will this evening and tomorrow take stock of Europe's economic outlook for the first time since a major financial market rout rattled investor confidence worldwide.

At their monthly talks, the ministers are also set to back separate plans to harmonise payments rules across the 27-nation bloc and ease restrictions on cross-border banking mergers.

Tonight's euro group meeting will assess the impact of the Chinese-led dive in equities in February.

'The recent turbulence in global equity markets was too limited to have impacted significantly on the aggregate euro area or EU economic performance,' the European Commission said in a draft report for the meeting.

The commission said the plunge 'may simply be a technical correction', adding that could 'even be welcomed as a necessary 'shake-out' in the international equity markets'.

However, it said the fall could be 'the beginning of a more sustained bear market, preceding a sustained adjustment in investor sentiment away from relatively risky investments'.

The commission is forecasting that euro zone growth will slow this year to 2.4 pct from 2.6 pct last year.

The risks to that forecast have long included the impact of rising interest rates, an oil price spike and a surge in the euro, but the growing prospect of a significant slowdown in the US has cast a new cloud over the outlook.

At tomorrow's meeting of all 27 ministers the focus will shift to plans to allow individuals and businesses to use payment cards and make bank transfers across the EU under the same terms as in their home country from next year.

'This text will have a real impact, it will allow Europeans to use the same payment means in all of the EU countries,' a French diplomat said.

Ministers will also look at plans to make it easier for European banks to carry out cross-border mergers, amid the merger plans of Barclays PLC and ABN Amro Holdings NV along ING's search for a Belgian partner.

The ministers are expected to approve proposals to tighten rules on central banks' authority over bank mergers after the Italian and Polish central banks were widely seen as having used their powers to discourage foreign takeovers.

If the ministers back the proposals, central banks would only be able to review banking merger deals according to the buyer's reputation, financial health, the reputation and experience of the new company's management, respect of EU rules and risks of money laundering or terror financing.

They would also have only 30 days instead of three months to examine such deals and they would be able to suspend a proposed tie-up only once.

Among budgetary questions, Portuguese finance minister Jose Socrates will tell his colleague that his country is making better-than-expected progress towards cutting its deficit below the stability and growth pact limit of 3 pct of GDP.

The Portuguese deficit narrowed to 3.9 pct last year compared with the 4.6 pct target agreed with the commission. Socrates has therefore lowered Portugal's deficit target to 3.3 pct for this year from 3.7 pct.

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