The economy performed strongly in the first half of 2003, as buoyant domestic demand more than offset the weakness of exports. With monetary and other conditions remaining supportive and net exports recovering thanks to the international rebound, output growth is projected to gather additional momentum, before easing somewhat in 2005. The labour market should improve further, but the inflation gap vis-à-vis the euro area average is likely to widen. Fiscal consolidation, especially tighter control of government primary expenditure, needs to be persevered with, to ensure the reduction of the still high debt-to-GDP ratio. There is also a need to strengthen the longer-term underpinnings of growth and competitiveness, through more decisive action to address labour market rigidities and to open up network industries to competition...