Uncertainty over a possible war in Iraq has left "skid marks" on Europe's already limping economy, but a recession is unlikely, EU finance ministers said Tuesday.
Meeting in the same building where EU leaders hammered out a common position seeking to avert a war in Iraq, finance ministers said the crisis had already dampened market and consumer confidence, pushed up oil prices and weakened the dollar, making European exports costlier.
"Negative signs have been accumulating at a steady pace and geopolitical instabilities ... reached new highs," said Greek Finance Minister Nikos Christodoulakis, whose country holds the EU presidency.
"These facts point to a further delay of significant economic recovery in Europe," he said.
German Finance Minister Hans Eichel said the crisis had left distinct "skid marks" with a "very, very noticeable weakening of growth" in the 12 countries using the euro.
But, he added, "a recession is unlikely."
EU officials still expect an economic comeback in the second half of the year, but at a lower level than the 1.8 percent growth forecast last fall.
"Our November forecast is clearly too optimistic," said EU's Economic and Monetary Affairs Commissioner Pedro Solbes. He didn't furnish any new figures.
Solbes rejected calls for loosening the EU's budget rules in the face of a looming war in Iraq, insisting that they were flexible enough already.
The rules, which insist on budget deficits below 3 percent of GDP, already allow for breaching the limit in exceptional circumstances outside a country's control, such as natural disasters or, potentially, a war.
Eichel said the decision about whether an Iraq war would qualify as an exceptional circumstance would have to be made by all finance ministers.
"This depends on what scenario will play out in a possible war," he added.
The European Commission last month approved Britain's budget plans, ignoring a rising deficit, due to increased investment in public services, by pointing to strong underlying finances. But the gentle report drew dissent Tuesday from some small countries that fear it could weaken budgetary discipline.
A compromise text was adopted that drops the commission's nod to larger British deficits as long as the 3 percent limit is not breached, but did not include harsh criticism either.
The commission attached its differing opinion at the end, sending a confused signal to London.
Another agenda item -- the EU's proposal for harmonizing energy taxes -- failed to win approval and was put off until next month's meeting. Any agreement on taxation requires unanimous approval.
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