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EU economy improving amid 'exceptional risks'

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The EU Commission has raised its outlook for the blocs economic growth, saying Europes recovery remains on track but is vulnerable to the "exceptional risks" of Brexit and the new US administration.

The European Commission published its winter economic forecast on Monday, slightly revising up its predictions for growth in both the euro currency area and the wider 28-nation EU. Even though Europe was still navigating "choppy waters," Economic Affairs Commissioner Pierre Moscovici said the European economy had proven "resilient to the numerous shocks it has experienced over the past year."

As a result, the Commission sees the 19-country eurozone expanding by 1.6 percent in 2017 and by 1.8 percent in 2018, compared with predictions made in autumn of 1.5 percent this year and 1.7 percent in the next.

For the wider 28-nation EU, the Commission predicts growth of 1.8 percent in both 2017 and 2018.

Big clouds hanging over Europe

The report speaks of "exceptional risks" facing the recovery in Europe, stemming mainly from Britains vote to leave the EU and uncertainty over the policies of US President Donald Trump.

"The particularly high uncertainty… is due to the still-to-be-clarified intentions of the new administration of the United States in key policy areas," it said, adding that the numerous elections to be held in Europe were also weighing on growth prospects.

In view of "uncertainty at such high levels," Moscovici called on political leaders to use "all policy tools to support growth." Regarding Europes fight against stubbornly low inflation rates, the Commission sees consumer prices only "creeping" higher over the next two years, as energy prices were rebounding from historic lows. At the same time, it warned the European Central Bank (ECB) against ending its massive stimulus program because it had strengthened the economic recovery in the past few years.

Overall, inflation in the eurozone is predicted to increase from a low 0.2 percent in 2016 to 1.7 percent in 2017 and 1.4 percent in 2018, with the Commission expecting increasing international pressure on the ECB to taper its stimulus. uhe/jd (dpa, AFP, Reuters)
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