The European Commission is set to cut its forecast of 2003 euro zone economic growth to 0.5 per cent from a previous estimate of 0.7 per cent, according to a draft Commission document.
"The average [euro zone] growth rate for 2003 could stand at around 0.5 per cent," an EU source quoted the paper, to be discussed tomorrow, as saying.
A spokesman for the Commission declined to comment on the paper, which sums up the Commission's economic outlook before a European Union finance ministers' meeting in Italy this week.
The euro zone economy is struggling. Data released earlier today showed that gross domestic product fell 0.1 per cent in the second quarter of 2003 from the previous quarter.
According to a Commission forecast model growth in the 12 nation bloc was expected to be between zero and 0.4 per cent in the third quarter of this year and between 0.2 and 0.6 per cent in the fourth quarter.
The draft paper is expected to be endorsed by the 20-member Commission at its weekly meeting tomorrow.
The document took note of the worsening budgetary situation in some large EU member states but did not mention the Stability and Growth Pact.
EU ministers are expected to discuss ballooning budget deficits in large countries such as France and Germany at their meeting on September 12-13 even though the issue is not officially on the agenda, EU diplomats said.
France, which risks breaching the EU's deficit cap of 3 per cent of gross domestic product for three years in a row, has been given until October 3rd to outline the budget steps it plans to take to bring its deficit back below EU limits.