The European Central Bank (ECB) is showing no mercy to the commercial banks in its management of the euro. It announced yesterday - in the face of opposition from many banks - that commercial banks will have to pay a penal interest rate of 4.5 per cent if they have to fall back on the ECB's emergency lending facility, and will get only 2 per cent for surplus funds deposited there.

The gap between the two rates is wider than when the euro was launched a few weeks ago, despite complaints by commercial banks that they continue to have to borrow from the ECB because of problems with the new Target payments system, which transmits money across the euro zone.

The ECB, meanwhile, has left its main interest rate, which affects the rate charged to bank and building society customers, unchanged at 3 per cent. The bank is also seen as likely to resist proposals led this week by the Belgian government for the euro notes and coins to be introduced ahead of the January 2002 schedule.

Introducing the coins and notes ahead of schedule would create logistical difficulties, although it has not yet been formally ruled out.