Brussels, 09/06/2006 (Agence Europe) - First reactions to the decision by the European Central Bank to raise interest rates once again (see EUROPE 9207) have been solidly negative, both from the European Parliament and industry.
French Socialist MEP Pervenche Berès, chairwoman of the EP economic and monetary committee, said in a press release, “For the third time since 2 December 2005, the ECB has decided to increase its reference rate by a quarter of a point, at a time when, finally, the European economy is beginning to recover its dynamism. Once again, this decision is part of the ECB's 'better avoid than cure' philosophy on the dangers of inflation. This decision … makes investment choices more difficult for companies, especially SMEs. The cost of borrowing, which companies cannot predict, is increasing. The ECB must take care not to impede growth and not to act without taking into account the effect of its actions on the global economic environment”.
For employers, UNICE speaks in a press release of the current signs of recovery, yet, “there is no outburst of domestic inflationary pressures in sight and the euro has appreciated significantly since the last interest rate hike in March”. Its President Ernest-Antoine Seillière commented, “The sustainability of this recovery should not be taken for granted and there are risks relating to exchange rate developments. The ECB should balance these considerations against modest inflation. The ECB should acknowledge in future policy decisions that the euro is approaching the pain threshold for EU businesses”.
EuroCommerce is also severe in its criticism, and warns of “the potential impact this interest rate increase will have on purchasing power, consumption, growth and employment”. Consumers are losing confidence and, as a result, are tending to reduce their spending, thus having a negative impact on commerce, the organisation says in a press release. The commerce sector is “one of the few sectors still creating employment,” points out Dr Bernert, EuroCommerce President.