A member of the European Central Bank's governing council rejected US calls for an easing of monetary policy yesterday, and said euro zone interest rates were no obstacle to recovery.

Mr Nout Wellink, who was speaking on the fringes of a meeting of the International Monetary Fund (IMF) and World Bank in Dubai, said he also saw visible signs of an improvement in the euro-zone economy.

"Monetary policy is in no way hampering the recovery. On the contrary, monetary policy is on the loose side and is stimulative at the moment," said Mr Wellink, who is head of the Dutch central bank and is considered an inflationary hawk on the ECB council.

Financial markets expect the ECB to keep interest rates at a record low of 2 per cent for several months. But at the Dubai meetings yesterday the ECB found itself criticised by US Treasury Secretary Mr John Snow and his Canadian counterpart Mr John Manley for not doing enough to foster growth.

Mr Manley told the IMF that Europe's economic performance continued to "languish". "In our view, further monetary easing should be considered to reinforce growth prospects," he said.

Mr Snow took a similar line - arguing governments needed to take action to remove obstacles to faster growth. "We also need, in the case of Europe, more accommodative monetary and fiscal policy," Mr Snow said.

A Treasury official subsequently said that Mr Snow had not intended to say Europe needed to cut rates, but was reinforcing his campaign to promote global growth.

The US Federal Reserve has cut interest rates 13 times since January 2001 - taking them to a 45 year low of 1 per cent to rekindle growth - whereas the ECB has made seven cuts to a record low of 2 per cent.

In its world economic outlook issued on Thursday, the IMF said a further cut in ECB interest rates should be considered if growth failed to pick up or inflation was in danger of falling too far.

It said the ECB might need to be more "activist".

Mr Wellink did not respond directly to the Canadian and US comments, but said that what worked for them might not necessarily work in the euro zone.

"People perhaps in the US also expect the authorities to react more aggressively than we have in Europe...we have a more steady hand with monetary policy, perhaps less aggressive.

"People in Europe do understand that," he said.

Mr Wellink declined to comment on whether the ECB was now on hold for some period of time. But he said that growth in the currency bloc would slowly pick up, returning to trend potential in the second half of next year.

"In the context of Europe, I am inclined to use the phrase 'cautious optimism' ... we all know from experience that with a certain time lag Europe follows what happens in the US."

He said signs of an improvement in the euro zone were visible here and there, naming higher German stock markets as well as leading indicators and barometers of business and consumer confidence as concrete evidence of this. - (Reuters)