No one proposed a cut in interest rates at the European Central Bank's June 2nd monetary policy meeting, governing council member Yves Mersch said yesterday, without excluding that a cut may have been discussed.

Asked at a news conference if the ECB had discussed cutting rates, Mr Mersch said: "I can tell you there was no proposal concerning a rate cut."

Earlier yesterday, ECB chief economist Otmar Issing suggested reporters should listen closely to the central bank's statements. Asked if the ECB discussed a rate cut, Mr Issing said he would do as the ECB president, Jean-Claude Trichet, did and not answer the question.

The ECB is under growing political pressure to cut interest rates as high oil prices and worsening economic sentiment threaten Europe's faltering economic recovery. In past months, it has explicitly denied discussing a cut at its monthly meetings.

But after Thursday's decision to hold interest rates at 2 per cent, Mr Trichet declined reporters' requests to issue a similar denial, saying: "If I was preparing for a rate cut, I would tell you."

Looser ECB monetary policy would not boost growth, and governments must look to structural reform to stimulate the economy, said Mr Mersch, who heads the Luxembourg central bank, when he presented its annual report.

"Monetary policy has exhausted its margin of manoeuvre and cannot put its mandate of price stability in danger, in the face of a growing crisis of confidence regarding the difficulty of implementing unavoidable reforms," he said in the foreword to the report.

Mr Mersch heads the Luxembourg central bank. The bank's annual report was published on Friday but was written before Thursday's ECB meeting.

"Monetary stimulus seems unable to exercise a determined and sustained effect on the dynamism of Europe's growth," Mr Mersch said.

Analysts say the French and Dutch rejection of the European Union constitution risks slowing the pace of economic reform, which the ECB has said is essential to promote growth and cut high unemployment.

The Luxembourg central bank report said ECB monetary policy was compatible with its main goal of maintaining price stability over the medium term. The ECB defines this as consumer price inflation close to, but below, 2 per cent.

On Thursday, the ECB ruled out a cut in interest rates, saying that guaranteeing stable prices is the best remedy for helping the euro-zone economy deliver jobs and growth.