ECB need statistics to help weak economy

THE European Central Bank has been urged to cut interest rates to rescue a weak euro area economy as the Bank of England kept its borrowing costs at a 48-year low of 3.75%.

And yesterday the ECB said it requires far more and far better statistics about the economic developments in the 12 euro-zone countries to help in its deliberations when it sets interest rates for the world’s second-largest economy.

“The supply of economic statistics for the euro area as a whole is still less complete and timely than in a number of individual euro area countries or major trading partners such as the UK and the US,” the ECB said.

The chief economist at the Organisation for Economic Cooperation and Development (OECD) said the conditions are met for a rapid and substantial loosening of interest rates in Europe at a conference organised by AJEF, a French association of financial reporters.

The ECB’s 18-member governing council, which last pared rates a quarter point to 2.5% on March 6, is next scheduled to set rates on May 8. Another quarter-point reduction would take borrowing costs to the lowest in any euro country since at least 1948.

“There is lingering weakness in the economic activity’ of the OECD’s 30 members, Cotis said. The risks of recession are now “slightly more remote than a few weeks ago,” because oil prices have receded since the start of the US-led war to overthrow the Iraqi regime, he said.

The ECB’s 18-member governing council, which last pared rates a quarter point to 2.5% on March 6, is next scheduled to set rates on May 8. Another quarter-point reduction would take borrowing costs to the lowest in any euro country since at least 1948.

Mr Cotis urged government to keep a lid on deficits and debt, saying the burden may boost long-term interest rates and stifle corporate investment when OECD economies start to recover.

Mr Cotis said the US twin deficits of budget and current account are “unsustainable’ and may prompt the dollar to weaken, with “a risk of non-negligible disruption in the global economy,” he said.

Yesterday, the Bank of England kept its benchmark interest rate at a 48-year low of 3.75%, suggesting policy makers will assess the economic impact of the Iraq war before further reducing borrowing costs.

Additional reporting Bloomberg and Reuters.