Economic growth is expected to ease somewhat in 2005 but strengthen to 2¾ per cent in 2006 as export markets remain buoyant and business investment picks up. The unemployment rate should fall to 7¼ per cent by 2006 with the underlying inflation rate remaining at around 1¾ per cent as the unfavourable effects of the increase in energy prices fade but the economy moves from below to above-potential growth. If the euro were to be stronger than assumed, growth and inflation would be lower. Further efforts are needed to ensure that the budget remains balanced. Measures should focus on expenditure restraint, as planned, since the high tax burden on labour discourages work effort. Further reforms are also needed to reduce incentives for early retirement and raise the participation rate. ...