The rift between the European Central Bank (ECB) and the euro zone's political leaders widened yesterday when the Bank rebuffed a veiled call for intervention to weaken the euro and again urged governments to reform to boost growth.
Mr Ottmar Issing, the ECB's chief economist, dismissed German Chancellor Gerhard Schröder's challenge to the Bank to do more to help exporters, insisting competitiveness did not just depend on the exchange rate.
Echoing ECB president Mr Wim Duisenberg's tough posturing, Mr Issing said the ECB had now done enough to foster recovery and stressed it was time for politicians to play their part in improving growth prospects.
His remarks followed Mr Schröder's comment in a Financial Times interview that he assumed the ECB discussed "the question every day of whether they have done enough" to maintain export competitiveness.
Mr Schröder's comment, just a day after the ECB held interest rates steady at 2 per cent, deepened the divisions between the bank and EU leaders over fiscal and monetary policy in the euro zone.
Economists fear the increasingly strident stand-off between the ECB and national governments could prompt the bank to dig in its heels and delay further interest rate cuts despite continuing economic weakness.
Mr Duisenberg insisted it was now up to national governments to boost growth prospects by overhauling labour markets, ushering in other reforms and tackling ballooning budget deficits. Interest rates would be held at their current low level for some time. - (Financial Times Service)
