THERE is a lot of good news from Europe for the Pakistani exporters. The region, perhaps the biggest market for Pakistani textiles is in a state of boom of sorts. And from the look of it, this is going to sustain at least for a couple of years more even if half of the current projections of the future come true.

But then to get the maximum benefit out of this upswing in the European economy those sitting in our commerce ministry in Islamabad and our representatives in Brussels will have to make some quick adjustments and draw some long-term programmes in conjunction with the exporters to enhance value-addition and at the same time ensuring that Pakistan gets the maximum from tariff concessions offered by Europe to developing countries’ exports on various pretexts.

The European Commission is projecting that the 12-member eurozone will end the year with a growth rate of 2.6 per cent, the fastest in about six years.

The currency bloc's biggest economy, Germany with a growth rate of 2.5 per cent is said to be taking the zone on an economic upswing that it has rarely seen in recent years. Germany’s economy is zooming after coming out of a prolonged period of stagnation and widespread unemployment that had marred other regional economies as well.

The zone is suddenly getting foreign orders in huge numbers thanks to significantly strong performance of its corporate sector which is said to have taken the bull by the horns in the highly competitive global market by exhaustive re-structuring.

Indeed, unemployment in the eurozone has dropped to its the lowest level for about 13 years, official figures showed with the region's jobless rate falling to 7.7 per cent in December after reaching a peak at about 9.0 per cent in mid-2004.

At the same time, a number of economic sentiment surveys have helped to underscore the growing sense of optimism about the sustainability of the economic pickup.

In addition, both eurozone business leaders and finance ministers have reacted calmly to euro's recent ascent which has raised prospects of the common currency heading towards an all-time high of 1.36 dollars, its highest at the end of 2004.

Experts believe while the region is ending the year on an upbeat note the real test of the upswing that has built up this year is likely to emerge in coming months.

German news agency the dpa has reported early last week that of particular concern to analysts was that an economic slide in the US combined with a further acceleration in the euro could undercut the eurozone's key export machine.

This could occur just as the Germany increased its VAT and Italy pushed up its taxes and the European Central Bank's combined 150 basis points increase in interest rates this year.

However, Germany's three-point increase in sales tax at the start of next year won't cause too much damage to the wider euro region’s economy the European Central Bank (ECB) President Jean-Claude Trichet was quoted as saying on Sunday last. "There are not many people left who think that it will cause very serious damage to the German economy, and therefore the European economy," Trichet said in an interview with the Germany's Der Tagesspiegel newspaper.

There would be "a small rise" in growth in the final quarter of this year as consumers spend in advance of the higher levy and then "a kind of a small dip" in the first three months of 2007, the paper quoted Trichet as saying.

Trichet, who made no reference to current monetary policy or interest rates, urged continued wage restraint in Europe, saying that labour unions should not forget unemployment remained too high, the paper reported. "If we want to create lasting growth and jobs, a high level of responsibility is necessary," Trichet said. The central bank president said it was positive that Germany had brought its budget deficit back below the European Union's three per cent of gross domestic product (GDP) limit this year and urged the EU nations to push ahead with structural reforms.

He also called on Germany's state-owned banks to open up further to competition, saying it would be in the interest of both Germany and Europe.

Also overhanging the eurozone as it enters the new year is the threat posed by renewed inflationary pressures. Indeed, after falling sharply following a record high of $78.40 per barrel in July, oil prices have begun to pick up again in recent weeks.

Already evidence has emerged that the pace of the eurozone's expansion might have slipped during the second half of the year.

After a second-quarter growth of 1.0 per cent, the eurozone slowed to 0.5 per cent in the third quarter, with the commission projecting a 0.5 per cent expansion rate for the fourth quarter.

In the opinion of the European Commission, US economy’s slowdown should have only a ‘limited’ effect on the expansion in the dozen euro nations. The euro region is now stronger than at the time of previous US downturns and the US share of Europe’s trade market has diminished, the commission, the European Union’s executive arm, said in a quarterly report released on Monday last in Brussels. Risks to the outlook would grow if the US slowdown deepened, it said.

‘‘While slower growth in the US will undoubtedly have an impact on the rest of the world, our analysis suggests that its effect on activity in the euro area should be limited,’’ Klaus Regling, head of the commission’s economics department, said in the report.

The report said that while the European economy would slow next year after the best performance in six years in 2006, growth would remain robust and be able to ‘withstand negative influences’ such as the slower US expansion, rebounding oil prices and the imposition of a higher sales tax in Germany.

‘‘The recovery in consumption now seems firmly established, as a strengthening labour market and improving consumer confidence buttress household spending,’’ the report said. The US economy has cooled significantly in recent months, with growth slowing to 2.2 per cent in the third quarter from 5.6 per cent six months earlier, as a recession in the housing sector and a slump among car makers take hold. In a special study, the commission said that while the European and the US economies remained closely linked the likelihood of a ‘‘decoupling’’ was greater this time because the euro-area economy was enjoying a domestic-driven expansion as unemployment fell to a five-year low.

At the same time, given the US slowdown was driven by domestic concerns rather than a problem in the world economy as a whole, only five per cent of the European exports would be ‘‘more-or-less strongly’’ affected by weaker US demand, the EU said. Greater trading relationships with Asian economies also mean the US isn’t as an important a market for European products as it once was, the report said. The US weakness may even be beneficial if it leads to a correction in the so-called trade imbalances such as the near-record US current-account deficit, the EU said. Still, the commission said the European economy could become more vulnerable if the US slowdown worsened or sparked a surge in the euro’s value.

‘‘A more severe downturn in the US economy could lead to a deterioration of the outlook for the euro area,’’ the report said.