The European Commission raised its growth forecasts for the euro zone this year, citing an expected upturn for heavyweight Germany, but cut its estimates for 2007 amid concerns over economic imbalances and the high price of oil. In its spring forecasts, the commission increased its projection for euro zone growth this year to 2.1 pct from the 1.9 pct given in both its autumn forecasts and in its more recent interim estimates. "The main impulses stem from a robust increase in investment, continued strong world growth and an improved outlook in Germany," it said. The commission's autumn forecasts -- its most recent full set of projections -- were published on Nov 17, while its interim forecasts based on 2006 growth and inflation estimates for France, Germany, Italy, Spain and the UK were released on Feb 25. It cut its euro zone growth projection for 2007 to 1.8 pct from its autumn forecast of 2.1 pct. But the commission downplayed the significance of this downward revision. "The growth moderation in 2007 has to be seen in the context of the planned budgetary measures," it said. As a result of Germany's VAT rise scheduled from Jan 1, 2007, the country's consumers are expected to bring some of their spending forward to this year. "While this has a marked impact on the projected profile, the overall growth effect for Germany of the budgetary policy measures is assessed to be broadly neutral over... two years and does therefore not imply a weakening of the underlying growth momentum in 2007," it said. The commission cited global imbalances and oil prices as the main threats to the revival of growth in the euro zone. "In particular, a disorderly correction of global current account imbalances remains one of the main downside risks," it said. "The biggest near-term risk, however, lies with the oil markets. The very low spare capacities make markets extremely vulnerable to actual and potential supply disruptions," it said. "As the current high oil prices contain a significant risk premium due to geopolitical tensions, the oil price assumption of the forecast -- 68.9 usd per barrel on average for 2006 and 71 usd per barrel for 2007 -- is subject to a considerable risk, both on the upside and downside," it said. The commission said the widely expected interest rate hikes in the euro zone are likely to have little impact on the forecast rise in investment "given the momentum of the recovery". By country, the commission raised its growth forecast for Germany for 2006 to 1.7 from 1.5 pct in February and from November's 1.2 pct. But it cut its 2007 projection to 1.0 pct from its autumn estimate of 1.6 pct. French growth is now seen at 1.9 pct this year unchanged from the interim forecast but up from the autumn projection of 1.8 pct. The commission lowered its 2007 growth forecast for France to 2.0 pct from November's 2.3 pct. Outside the euro zone, it increased its UK growth forecast to 2.4 pct for this year from November's 2.3 pct, although this was unchanged from its interim estimate. The commission left its 2007 growth forecast unchanged at 2.8 pct.