BRUSSELS: The European Commission has forecast that the thirteen nations comprising the euro currency zone (Eurozone) will claim the title of the developed world's fastest growing economy in 2007, overtaking the USA and Japan, while the broader EU is expected to grow still faster.

Thanks to the ongoing German recovery, the EC predicts the Eurozone economy will expand 2.7% this year, bettering the estimated US growth of 2.2% and Japan's 2.3%.

Across the European Union as a whole, the economy is forecast to grow 2.9%, compared with February's 2.7% prediction.

The outlook for individual member states is mixed. The German powerhouse is likely to pull ahead by 2.5%, according to the EU's executive arm, but France is falling behind the Eurozone average of 2.6% to 2.4%.

Comments EU economic and monetary affairs Commissioner Joaquin Almunia: "The European Union and the euro area remain on a brisk growth path that should reduce the unemployment rate and the average public deficit further to levels not seen in a long time."

The Commission expects the Eurozone to see six million new jobs created between 2006 and 2008 and the unemployment rate to fall from 7.3% this year to 6.9% in 2008.

Public deficit levels are likely to fall this year to one percent, with only Portugal over 3%, with a deficit of 3.5%. Eurozone inflation is forecast to drop to 1.9% n 2007 and 2008, from 2.2% last year.

The Commission says growth could be even stronger if receding unemployment levels lift consumer confidence and boost domestic demand.

But warning bells were sounded over a slowdown in the US economy and a hike in oil prices, both of which could compromise the EU's optimistic outlook.

Data sourced from Deutsche Welle (Germany); additional content by WARC staff