The economy is past the turning point, but the strong euro is weighting on the recovery.Growth is projected to firm from ½ per cent in 2003 to 1½ and 2½ per cent in 2004 and 2005. This pick up is underpinned by the strong recovery in world trade, improving corporate balance sheets and a supportive stance of monetary policy. Further exchange rate appreciation and persistently poor household sentiment could hamper the recovery. The unemployment rate is expected to peak at 8¾ per cent in 2004. Inflation is likely to ease to about 1½ per cent in 2004. With the output gap still wideningand on the basis of these inflation projections some further monetary easing would be warranted. There is no leeway for fiscal policy to provide growth impetus in view of the need for fiscal consolidation in many countries. To raise resilience in response to adverse shocks and to stimulate economic growth on a sustainable basis, structural reforms are essential. These should focus on creating a truly integrated European market, increasing business dynamism and pushing ahead with labour market reforms....