EU praises central bank on interest rates stances.
The EU presidency praised the European Central Bank Wednesday for resisting a lowering of interest rates despite a slowing of economic growth in Europe. Slovenian Finance Minister Andrej Bajuk, whose country holds the presidency of the 27-nation EU, said the ECB was doing "a very good job."
It has chosen not to cut its key interest rate despite evidence that the economies of the 15 EU nations that share the euro are slowing and the euro zone's average inflation rate may average 3.2 percent this year -- well above the ECB's target of just below 2.0 percent.
On Tuesday, the chief of the 15-nation euro zone urged governments to help curb inflation by securing moderate wage increases and also curbing "scandalous" exit and other bonuses for corporate executives. "There is no risk of a recession in Europe," said the group's spokesman, Luxembourg Finance Minister Jean-Claude Juncker. "But we remain on guard as far as inflation is concerned."
The ECB has kept its key interest rate at 4 percent, resisting lowering the central lending rate, as the U.S. Federal Reserve and the Bank of England have done to boost consumer confidence and growth.
Interest rate cuts stimulate the economy but can fuel inflation as they encourage consumer spending by lowering the cost of borrowing money. "Nobody has inflation under control," Bajuk said Wednesday before chairing a meeting of the 27 EU finance ministers. He added, "But we are very happy with the way the ECB has been reacting to the problems" of rising prices in recent months.
The euro has weakened slightly against the U.S. dollar -- to just under $1.55 from a record high of $1.6018 on April 22 -- as investors have become less pessimistic about U.S. economic prospects and more convinced the euro-zone economy is set to slow significantly.
On Tuesday, the 15 euro-zone finance ministers endorsed an April 28 forecast by the European Commission of growth of only 1.7 percent this year, well below the 2.6 percent in 2007, and shared its concern that high energy and food costs may trigger an inflationary spiral.
Juncker told reporters after the meeting that governments must make sure trade unions and employers stick to their policy of wage moderation. At the same time they must no longer tolerate performance or exit bonuses for top industrialists "that are really quite scandalous."
"Wage moderation is of paramount importance," said Juncker. But he added public opinion will not understand that wages must be restrained while corporate executives pocket huge payouts. He gave no examples.
EU Monetary Affairs Commissioner Joaquin Almunia said the EU executive first urged governments to curb these bonuses in 2004, possibly by taxing them more. But he said this has largely been ignored, except in the Netherlands where the government is drafting legislation.
The EU presidency praised the European Central Bank Wednesday for resisting a lowering of interest rates despite a slowing of economic growth in Europe. Slovenian Finance Minister Andrej Bajuk, whose country holds the presidency of the 27-nation EU, said the ECB was doing "a very good job."
It has chosen not to cut its key interest rate despite evidence that the economies of the 15 EU nations that share the euro are slowing and the euro zone's average inflation rate may average 3.2 percent this year -- well above the ECB's target of just below 2.0 percent.
On Tuesday, the chief of the 15-nation euro zone urged governments to help curb inflation by securing moderate wage increases and also curbing "scandalous" exit and other bonuses for corporate executives. "There is no risk of a recession in Europe," said the group's spokesman, Luxembourg Finance Minister Jean-Claude Juncker. "But we remain on guard as far as inflation is concerned."
The ECB has kept its key interest rate at 4 percent, resisting lowering the central lending rate, as the U.S. Federal Reserve and the Bank of England have done to boost consumer confidence and growth.
Interest rate cuts stimulate the economy but can fuel inflation as they encourage consumer spending by lowering the cost of borrowing money. "Nobody has inflation under control," Bajuk said Wednesday before chairing a meeting of the 27 EU finance ministers. He added, "But we are very happy with the way the ECB has been reacting to the problems" of rising prices in recent months.
The euro has weakened slightly against the U.S. dollar -- to just under $1.55 from a record high of $1.6018 on April 22 -- as investors have become less pessimistic about U.S. economic prospects and more convinced the euro-zone economy is set to slow significantly.
On Tuesday, the 15 euro-zone finance ministers endorsed an April 28 forecast by the European Commission of growth of only 1.7 percent this year, well below the 2.6 percent in 2007, and shared its concern that high energy and food costs may trigger an inflationary spiral.
Juncker told reporters after the meeting that governments must make sure trade unions and employers stick to their policy of wage moderation. At the same time they must no longer tolerate performance or exit bonuses for top industrialists "that are really quite scandalous."
"Wage moderation is of paramount importance," said Juncker. But he added public opinion will not understand that wages must be restrained while corporate executives pocket huge payouts. He gave no examples.
EU Monetary Affairs Commissioner Joaquin Almunia said the EU executive first urged governments to curb these bonuses in 2004, possibly by taxing them more. But he said this has largely been ignored, except in the Netherlands where the government is drafting legislation.
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