The European Central Bank has, as expected, kept its interest rate at the record low of one percent at its latest monthly meeting.President Jean Claude Trichet reported the 16 eurozone nations were being dragged along by the German and above all French economies, which showed signs of returning growth, but that Spain’s woes were deepening. “Some of the factors supporting the recovery at present are of a temporary nature. The Governing Council expects the euro area economy to grow at a moderate pace in 2010, recognizing that the recovery process is likely to be uneven and that the outlook remains subject to high uncertainty,” he said. Some of those temporary factors Trichet referred to are the ECB’s own, and he also announced the December the 15th 12-month soft loan offer to needy banks would be the third and last. This is because although growth forecasts for next year have been revised up, so have the inflation figures. By 2011 these could be close to 2 percent, the ECB’s upper limit. Christmas may be a defining moment for the European economy, although an investment rather than consumer-led recovery would be more sustainable, but that appears some way off. Major worries over the growth of new businesses, heavy price discounting, and rising unemployment remain. For example, lowered VAT in France to help the restaurant sector has not produced a jobs boom in the sector.
ECB keeps cash flowing, warns tighter policy to come