Interest rate cuts not an issue

EUROPEAN Central Bank council member Ernst Welteke said further cuts in interest rates aren’t an issue after the bank pared borrowing costs earlier this month.

>“In the last half year we have reduced interest rates by 125 basis points and now we have the lowest interest rates in 50 years,” Mr Welteke said in an interview with Deutsche Welle TV. “Monetary policy is not an issue that should be addressed in this situation.”

He added that there are no signs of an economic improvement in the dozen nations sharing the euro because “we’re currently dealing with a confidence crisis”, DW TV reported.

The ECB on June 5 cut its benchmark refinancing rate by 50 basis points to 2%, the lowest in any euro country since at least 1948. The bank expects the euro economy to grow between 0.4% and 1% this year.

Mr Welteke added that Germany may “probably’ breach a European Union budget rule next year that requires member states to pare their deficits to below 3% of gross domestic product, if there isn’t an economic recovery in the second half of the year.

Meanwhile, the chairman of European Union finance ministers meetings said yesterday a stable euro was important for the euro zone.

“When the euro reflects the fundamentals of the European economy it does not pose any risk for European competitiveness,” Greek finance minister Nikos Christodoulakis told the European Parliament’s economic and monetary affairs committee.