Europe Economy

ECB Should Stay on Hold: Belgian Finance Minister


The European Central Bank should leave interest rates on hold for now but consider cutting them if the economy worsens, Belgian Finance Minister Didier Reynders told a French newspaper in an interview published on Wednesday.

Speaking ahead of a meeting of euro zone finance ministers next week, Reynders also said pressure should be brought to bear on China to bring its exchange rate into line with the realities of world trade.

The comments come amid growing concern in Europe over the strength of the euro, which has risen to record levels of nearly $1.43 this week fuelling worries that the surging currency could
stifle exports from the euro zone.

"We have to be attentive to a possible slowdown in the economic machine in Europe," he told Les Echos, noting that inflation was largely under control.

"I think they should hold rates at their current level and consider easing pressure later if there is an unfavourable growth development," he said.

"What often strikes me is hearing ECB officials explain how the situation has changed, how it's worrying and then doing nothing," he said.

The comments, which echo remarks from French politicians including President Nicolas Sarkozy, come a day before the next meeting of the ECB Governing Council where the central bank is
expected to leave its main interest rate on hold at 4.0%.

Reynders remarks on currency came amid signs that euro zone governments were preparing to take a stronger stance on foreign exchange at the next G7 meeting in Washington this month.

Many of the comments from Europe have focussed on the dollar, but Reynders said the Chinese yuan was posing an even bigger problem.

"We are suffering a lot more from the anchorage of the yuan to the dollar than from the level of the dollar itself," he said.

"Above all, we have to work to make the Chinese move," he said. "China is more and more entering world trade. It has to be part of the world monetary system more and more as well."