Economic growth in the euro zone stagnated in the second quarter of 2003, according to figures released yesterday by Eurostat, the statistical office of the European Commission.

But the Commission also published forecasts of gross domestic product (GDP) growth in the euro zone, suggesting an upturn estimated at 0-0.4 per cent in the third quarter of 2003 and 0.2-0.6 per cent in the fourth quarter.

The optimism about a projected upturn at the end of the year was attributed to improvements in retail confidence in the euro zone and to the effects of faster growth in the US, the Commission said.

The forecast echoes the view of the European Central Bank, published last week, that there will be a gradual recovery throughout 2003, strengthening towards the end of the year.

But for the moment, the euro-zone economy remains sluggish. Eurostat estimates that, taking the 12 euro-zone countries as a whole, GDP did not grow at all in the second quarter of the year, compared with the previous quarter. The comparable figure for the first quarter of 2003 was 0.1 per cent.

Three euro-zone countries - Germany, Italy and the Netherlands - are officially deemed to be in recession, since they have returned negative figures for GDP for two consecutive quarters.

Italy's recession is the first for more than a decade.

The Dutch economy shrank by 0.5 per cent in the second quarter of the year, the sharpest quarterly fall for 11 years.

None of the other euro-zone countries apart from Greece, has yet published data for the second quarter.

Eurostat bases its flash estimate on the available national figures plus related indicators from France and Spain, such as retail sales and industrial production. A more detailed estimate of GDP will be published on September 9th.

European Commission spokesman Mr Eric Mamer yesterday played down comments from Ms Anna Diamontopoulou, the European Commissioner for Employment and Social Affairs, which appeared critical of the Stability and Growth Pact, the EU's mechanism for maintaining budgetary discipline.

Mr Mamer said the commissioner was "in brainstorming mode, which commissioners go into during the summer break".

The Commission stood by the pact, he said.