MercoPress. South Atlantic News Agency

Euro zone interest rate left at record low of 1% for tenth month

ECB president Jean-Claude Trichet: “recovery on track but uneven”

The European Central Bank (ECB) has kept the Euro zone benchmark interest rate at its record low of 1% for the 10th month in a row, as expected. ECB also signalled it would scale back the special lending measures introduced during the financial crisis even though the economy in the 16 countries that use the Euro is only barely growing.

ECB president Jean-Claude Trichet said that economic recovery in the Euro area was “on track but will remain uneven”.

Worries remain about Greece's ability to tackle its debt burden despite its announcement of new austerity plans. But Mr Trichet dismissed suggestions that Greece could leave the Euro as “an absurd hypothesis”.

“As president of the ECB I am making a very positive judgement on the decisions Greece has taken, they are convincing in our eyes.”
He also said it would be inappropriate for the IMF to give help to Greece.

When the credit markets seized up during the financial crisis, the ECB introduced a range of cheap bank lending operations to allow banks to have access to money.

Mr Trichet said the central bank would now begin withdrawing some of the measures put in place. For instance, the bank fixed the interest rate charged for three-month loans at the benchmark rate. That will now return to a variable rate from 28 April.

Euro zone interest rates have been at 1% since May last year.
ECB estimates that the Euro zone's economy will expand by between 0.4% and 1.2% in 2010 and between 0.5% and 2.5% in 2011.

Europe's return to growth is seen as fragile, with particular concerns about Greece, Spain, Italy, Ireland and Portugal.

Separately on Thursday, Eurostat confirmed its initial estimate that the Euro zone and the wider EU27 economic area had both grown by 0.1% in the final quarter of 2009. However GDP fell by an upwardly-revised 4.1% across the Euro zone over the whole year, Eurostat added.