"Inflation is not the problem now, but there is no room for complacency... we are not faced now with a problem of deflation... regarding oil prices, there does not seem to be currently cause for concern," Greek Finance Minister Nikos Christodoulakis said at a press conference during an informal meeting of European Union finance ministers.

On Friday, Christodoulakis and European Commissioner for Monetary Affrairs Pedro Solbes said the 12-country euro-zone economy would grow by 1.0 percent this year and 2.25 percent in 2004, provided tensions in the Middle East subside in the middle of the year and oil prices remain stable.

The European Commission, the EU's executive, had earlier predicted 1.8 percent growth for 2003.

Christodoulakis said on Friday the Iraq war created uncertainty and was a drag on the global economy, adding it was hard to gauge its actual impact.

On Saturday, however, German Finance Minister Hans Eichel said European Union finance ministers considered it unnecessary to take emergency measures to shield the EU's economy from the fallout of the war.

"Despite slowing growth and evident geopolitical risks, there is no emergency for immediate action," Eichel told reporters.

Christodoulakis ruled out financial aid for the struggling airline industry. "The Commission should remain vigilant as to state aid by the EU and the United States to airline companies," adding that EU members Britain, Germany, France and Italy will raise the issue on the April 11 meeting of the world's seven largest economies (G7) in Washington.

US airlines, troubled by mass cancellations due to terrorism fears and the threat of rocketing oil prices, have asked Washington for financial support.

European Central Bank chief Wim Duisenberg said another issue the Europeans will bring up at the G7 meeting was the growing US budget and current account deficits. This so-called twin deficit threatens to destabilise the world's largest national economy.

"I cannot deny that the twin deficit... is a matter that calls for vigilance... we're definitely going to discuss it during the G7 meeting, not in any way admonishing them or us," said Duisenberg.

According to official figures, the US current account deficit bulged to an unprecedented 503.4 billion dollars (469 billion euros) in 2002 after a record shortfall in the last quarter.

During the meeting the ministers formally asked Duisenberg to postpone his retirement -- planned for July 9 -- until a replacement is in place.

The EU ministers also decided to propose to the International Monetary Fund (IMF), the member states of which meet in Washington on April 12-13, the creation of a new mechanism for restructuring of countries' debt.

Christodoulakis also said the ministers agreed to include so-called collective action clauses in their central government bonds, issued under a foreign jurisdiction from January 2004 onwards. These clauses are designed to help a country defaulting on its debt, like Argentina, to deal with its creditors.

Regarding financial regulation, Christodoulakis said the EU would ask the US to exempt European companies from recently passed legislation.

"... there should be a full exemption for EU audit firms from the audit registration process where there are... regulatory arrangements equivalent to those being introduced in the US," he said.

SPACE.WIRE