The President of the European Central Bank has ruled out cutting interest rates to boost growth and indirectly criticised Germany's budgetary policies. In Brussels, Mr Wim Duisenberg said the ECB could best serve Europe's economic interests by using monetary policy to keep inflation low.

"Central banks are ill-suited to fine tune economic developments. Actively using monetary policy to pursue output objectives only feeds inflation without yielding lasting increases in real activity," he said. Mr Duisenberg said most euro-zone governments had used the recent good economic conditions to improve their public finances, leaving them some room for manoeuvre as the economy slows down. But he warned that some countries were still far from the goal outlined in the euro-zone Stability Pact to balance budgets by 2004. "The latest available forecasts indicate government deficits in these countries may be in the vicinity of 2 per cent of GDP or even exceed that this year and in 2002. This is uncomfortably close to the 3 per cent limit," he said.

Mr Duisenberg did not name Germany, which expects to have a budget deficit of 2.5 per cent next year. But Belgium's finance minister, Mr Didier Reynders, left no doubt about which country was the biggest cause of concern. "It has to be said that Germany is probably the main worry," he said.

The Bundesbank President, Mr Ernst Welteke, joined in the attack during a speech in Berlin, although he said that Germany was not the only culprit.

"Current policy developments in the larger countries - Germany, France and Italy - show they are some way from the stability goals. And due to the economic developments they are threatening to push even further away," he said.