Brussels, 04/03/2010 (Agence Europe) - On Thursday 4 March 2010, the European Central Bank (ECB) decided to leave its major refinancing interest rates and the marginal loan and deposit lending rates for the eurozone unchanged at 1%, 1.75% and 0.25% respectively. The current interest rates are still appropriate, explained ECB president Jean-Claude Trichet. He said 'the economic recovery in the euro area is on track, although it is likely to remain uneven.' The ECB is forecasting growth in the eurozone's gross domestic product (GDP) of between 0.4% and 1.2% in 2010 and from 0.5% to 2.5% in 2011. Compared with its December 2009 forecasts, the growth rates for 2010 are slightly lower and the 2011 rates are slightly higher, added Trichet, with the aim of reflecting the increased economic recovery expected at global level. Trichet said that inflation would be around 1% in the short-term and would remain restrained and within the ECB's targets in the medium-term. In the eurozone, inflation is expected to be between 0.8% and 1.6% in 2010 and between 0.9% and 2.1% in 2011. Trichet said the ECB had moved closer to withdrawing the emergency financing measures it introduced at the height of the economic crisis and would continue to gradually withdraw the 'unusual' measures introduced by the ECB, which calls on banks to use these measures to enable them to invest in the real economy.
Discussing budget policies, Trichet pointed out that the eurozone countries' Stability Programmes had to include budget consolidation strategies that start in 2011 at the latest to reduce their budget deficits by at least 0.5% of GDP a year. This will require concerted effort, particularly by countries with high levels of debt and high budget deficits, added Trichet, saying that this will require ambitious structural reforms to liberalise the markets, increase competition and boost long-term investment. The ECB president said he had read the European Commission's statement, unveiled on Wednesday 3 March 2010, describing as 'credible' the new measures planned by the Greek government to meet its promise of reducing its public deficit to 4% of GDP in 2010 (see EUROPE 10090). Trichet said that any idea of Greece leaving the eurozone was 'absurd' and he also rejected any idea of the IMF providing aid of any type other than technical assistance. He praised the EU institutions' intervention in the Greek budget crisis, saying that the institutions were playing their role as set out in the Lisbon Treaty. Asked whether it wasn't contradictory to force Greece to implement drastic austerity measures just as the eurozone is finding it difficult to kickstart its economy, outgoing ECB vice-president Lucas Papademos said that if budget consolidation programmes are credible and sustainable, they will boost economic growth in the medium-term, encouraging job creation and permanent measures (including structural reforms) will help restore lost competitiveness. Trichet refused to comment on rumours of an EU ratings agency being set up to provide a counter-balance to the existing international ratings agencies' assessments of whether countries are able to meet their financial obligations. (M.B. trans fl)