High oil prices and slowing global manufacturing will keep euro-zone growth disappointing in the second quarter, the European Union said Monday. The European Commission's quarterly report on the euro area said its spring forecast of 1.6 percent growth this year may prove "a little optimistic." It said it believes the euro-zone economy will pick up in the second half of 2005 as the global economy recovers and exporters benefit from a more favorable euro-dollar exchange rate. However, the commission warned that EU countries urgently needed to reform labor markets and increase competition for products to tackle entrenched differences in national growth rates in the euro area. In particular, it said wages need to become more responsive to economic developments. EU Economic and Monetary Affairs Commissioner Joaquin Almunia said coming to grips with differences in growth was a priority to save national economies from long periods of low growth. "This is unwelcome as it could trigger a damaging spiral of falling potential growth due to weak investment, eroding skills and rising levels of economic inactivity among the working age population," he wrote in the report's editorial.