Trichet maintains stance on interest rates

EURO ZONE INTEREST rates are on course to rise after European Central Bank president Jean-Claude Trichet said he had “nothing…

EURO ZONE INTEREST rates are on course to rise after European Central Bank president Jean-Claude Trichet said he had “nothing to add” to remarks earlier this month.

Mr Trichet was speaking at an event in Frankfurt where Eurogroup chairman Jean-Claude Juncker said that the debt problems in some euro zone member states have not created a destabilising crisis for the single currency.

Asked if ECB policy makers still adopted a posture of strong vigilance – bank speak for an imminent rate increase – Mr Trichet said: “I have nothing to add, nothing to withdraw . . . no new message at all”.

Mr Trichet suggested it was too soon to assess the economic impact of the Japanese earthquake, tsunami and nuclear disaster. “The potential impact of the earthquake and aftermath is something we will be thinking deeply about in the coming days,” he said.

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At the Frankfurt event on the future of the euro, Luxembourg’s prime minister Jean-Claude Juncker insisted that the single currency remained stable.

“The crisis is not a euro crisis, the euro is still stable,” said Mr Juncker, pointing to the $1.40 euro-dollar exchange rate.

The problem in the euro zone was a debt crisis in some member states, he said, something that should not be confused with a widespread problem. He said that despite these isolated difficulties, the euro zone should push on with plans to introduce a financial transaction tax. “We have to hold to account those who triggered these unfortunate events that have unfolded over the last few years. That is why I am very much in favour of a financial transaction tax,” said Mr Juncker.

“We need to keep this on the agenda. If we don’t get it on that [G20] agenda, we have to see if we could get it through in Europe or the euro zone. I feel that Europeans can sometimes show the way.”

Asked about the permanent euro zone rescue fund, ESM, he said it was of “paramount importance” that the fund enjoys an AAA rating. It was likely that government guarantees will have to be increased to ensure this, he said, adding that it was too early for details.

“We have to find a mix between capital and guarantees and we are working hard to bring all these elements together in the light of next week’s meetings.”