(BRUSSELS) - Economic growth in the 13-nation eurozone has probably passed its peak, the European Commission said Tuesday, trimming its 2007 estimate due to financial market turmoil and a weak French performance.

But despite the downturn, the euro area countries can still look forward to strong growth although roller-coaster volatility has increased the risks to the outlook, the European Union's executive arm said.

"We can consider that the highest peak of this recovery is likely behind us," EU Economic and Monetary Affairs Commissioner Joaquin Almunia told journalists in Brussels.

The European Commission marginally cut its 2007 economic forecast for the eurozone to 2.5 percent from an estimate of 2.6 percent, although Almunia stressed "the fundamentals of the euro area and European economies are solid."

Meanwhile the economy of the combined 27-nation European Union is expected to grow 2.8 percent this year rather than the 2.9 percent forecast in May, when the Commission last updated its estimates.

Last year Europe saw the fastest growth since the turn of the decade, when the euro area economy expanded 2.8 percent and the European Union 3.0 percent, according to the Commission.

The estimates are "interim" forecasts based on the seven biggest eurozone and EU economies between more complete reports published twice-yearly in May and November.

Although the economy would withstand the recent nerve-wracking volatility on financial markets, the Commission warned that "the recent distress has clearly tilted the balance of risks to the downside."

Almunia warned that chaos on financial market could spill over to the real economy if a slowdown in the United States prove to be worse than expected or if credit conditions for business and consumers worsen sharply.

However, the biggest threat in Almunia's view was that the recent drama in the world of high finance could spook consumers and businesses, causing their confidence to drop and their spending to drop.

But overall domestic demand in Europe is currently expected to remain strong thanks to consumers becoming more confident about spending, with unemployment falling to levels not seen in Europe since the early 1980s.

While the Commission lowered only slightly its German growth estimate to 2.4 percent from 2.5 percent in May, it painted a distinctly darker outlook for France, the second biggest eurozone economy.

Although French President Nicolas Sarkozy has vowed to jolt France into faster growth with a raft of measures, the EU executive forecast that the French economy would grow only 1.9 percent this year, down from a May estimate of 2.4 percent.

The Commission said it expected sharply lower French growth because of an unexpected stagnation in business investment, likely to worsen due to the chaos on financial markets.

On the inflation front, the Commission predicted slightly faster consumer price growth due mainly to rising commodity prices, lifting its inflation forecast for this year to 2.0 percent from 1.9 percent.

Looking further ahead, the Commission hinted that it may cut its estimates for next year when they are updated in November, predicting "a somewhat reduced growth momentum in 2008" compared to the 1.9 percent forecast in May.

2007 economic growth and inflation forecasts

Text and Picture Copyright 2007 AFP. All other Copyright 2007 EUbusiness Ltd. All rights reserved. This material is intended solely for personal use. Any other reproduction, publication or redistribution of this material without the written agreement of the copyright owner is strictly forbidden and any breach of copyright will be considered actionable.