03/07/2003 13:39
European Central Bank President Wim Duisenberg said policy makers have reduced interest rates enough to kick-start the stagnating economy of the dozen nations that share the euro and called on governments to pare their deficits.
The ECB ``has done its part'' to boost growth, Duisenberg told the European Parliament in Strasbourg, France. ``Governments can no longer hide behind the ECB in order to cover up their failure to enact the structural reforms so urgently needed.''
He said interest rates, at 2 percent, are ``appropriate.''
As economic growth stalls, governments see tax revenues crumbling and welfare spending increasing. Germany and France are both set to breach the European Union's 3 percent deficit limit for a second year. Germany has decided to bring forward tax cuts.
The ECB expects inflation to slow ``significantly'' below 2 percent next year. It aims to keep inflation just under that level. The region's rate of annual price increases was 2 percent in June, up from 1.9 percent in May.
In late 2004 and in 2005 inflation could ``climb back in the direction that it will be close to 2 percent,'' Duisenberg said.
Austria's Klaus Liebscher last month said inflation will remain ``clearly under 2 percent'' in 2005. ECB board member Gertrude Tumpel-Gugerell yesterday said it's ``too early'' to give an inflation outlook for 2005.
`Significant Risks'
``The appreciation of the euro,'' which has gained almost 17 percent against the dollar in the past year, ``should contribute to keeping inflationary pressures low,'' Duisenberg also said. The single currency cost $1.1458 at 11:38 a.m. in Frankfurt.
The European Commission yesterday said the $8-trillion economy of the euro members stagnated in the first six months and that there are ``significant risks'' to a return to growth in the second half.
Companies such as Bayerische Motoren Werke AG have cited the euro's ascent as one of the causes pushing countries like Germany to the brink of recession. Exports from Europe's biggest economy have fallen in five out of the past seven months.
The ECB will trim borrowing costs by a quarter point by the end of September to help the economy start growing again, a Bloomberg News survey of economists showed. Policy makers are next scheduled to meet to set interest rates for the euro area on July 10, in Frankfurt.
Most investors also expect the ECB to pare rates this quarter, interest rate future contracts show. The yield on the September three-month Euribor was at 1.98 percent at 11:38 a.m. in Frankfurt, compared with a current three-month lending rate of 2.14 percent.
The ECB ``has done its part'' to boost growth, Duisenberg told the European Parliament in Strasbourg, France. ``Governments can no longer hide behind the ECB in order to cover up their failure to enact the structural reforms so urgently needed.''
He said interest rates, at 2 percent, are ``appropriate.''
As economic growth stalls, governments see tax revenues crumbling and welfare spending increasing. Germany and France are both set to breach the European Union's 3 percent deficit limit for a second year. Germany has decided to bring forward tax cuts.
The ECB expects inflation to slow ``significantly'' below 2 percent next year. It aims to keep inflation just under that level. The region's rate of annual price increases was 2 percent in June, up from 1.9 percent in May.
In late 2004 and in 2005 inflation could ``climb back in the direction that it will be close to 2 percent,'' Duisenberg said.
Austria's Klaus Liebscher last month said inflation will remain ``clearly under 2 percent'' in 2005. ECB board member Gertrude Tumpel-Gugerell yesterday said it's ``too early'' to give an inflation outlook for 2005.
`Significant Risks'
``The appreciation of the euro,'' which has gained almost 17 percent against the dollar in the past year, ``should contribute to keeping inflationary pressures low,'' Duisenberg also said. The single currency cost $1.1458 at 11:38 a.m. in Frankfurt.
The European Commission yesterday said the $8-trillion economy of the euro members stagnated in the first six months and that there are ``significant risks'' to a return to growth in the second half.
Companies such as Bayerische Motoren Werke AG have cited the euro's ascent as one of the causes pushing countries like Germany to the brink of recession. Exports from Europe's biggest economy have fallen in five out of the past seven months.
The ECB will trim borrowing costs by a quarter point by the end of September to help the economy start growing again, a Bloomberg News survey of economists showed. Policy makers are next scheduled to meet to set interest rates for the euro area on July 10, in Frankfurt.
Most investors also expect the ECB to pare rates this quarter, interest rate future contracts show. The yield on the September three-month Euribor was at 1.98 percent at 11:38 a.m. in Frankfurt, compared with a current three-month lending rate of 2.14 percent.
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