German uncertainty may lead to static interest rates

GERMANY’S unsatisfactory election outcome will damage its economic prospects and may force the ECB to leave interest rates unchanged until 2007.

If the economy fails to pick up in the meantime, the euro, already under attack in Italy, could become the scapegoat for problems in Europe, warned Bank of Ireland chief economist Dr Dan MacLaughlin.

From an Irish perspective the news is good because those heavily borrowed on their mortgages can look forward to historic low interest rates for another 15 to 18 months, he said.