European Central Bank president Mr Wim Duisenberg said today that economic growth in the euro zone is now "significantly lower" than previously expected.
"For the first time since agreeing on the stability and growth pact, economic growth is significantly lower than previously expected. This puts the European macroeconomic framework to a real test for the first time," Mr Duisenberg told a conference in Brussels.
The ECB is due to publish its latest economic projections tomorrow.
Duisenberg said some euro zone countries' budget positions are unsatisfactory. "In a few countries that still have high deficits, the prospects for a sound budgetary position are not improving sufficiently. This implies that these countries must give full priority to consolidation," he said.
He said several euro zone countries will have deficits of tow per cent of GDP or more this year and next.
"This is uncomfortably close to the three per cent limit. These countries do not have full leeway to allow the automatic stabilisers to operate freely, and in the current circumstances, meeting the targets of the stability and growth pact needs to be given continued priority," he said.
AFP