Ecofin meeting today
BRUSSELS – Eurozone finance ministers today will seek to strengthen the hand of European Central Bank doves on interest rate policy, arguing that high oil prices have not yet triggered wage demands and other price rises, European Union sources say. The ministers will meet in Brussels to discuss the economic situation of the 12 countries using the euro amid market expectations of a near-term ECB rate raise and signs that economic growth may be picking up. The ECB left its interest rate unchanged at historic lows of 2 percent on Thursday, saying there was still no clear evidence of inflationary pressures building up in the euro area. But the ECB also said it could raise borrowing costs at any time because of medium-term risks to price stability which could materialize if higher production costs are passed on to consumer prices, triggering higher wage demands and further price increases. After months of gradually toughening rhetoric, markets expect an ECB rate rise soon, possibly in December. International Monetary Fund chief Rodrigo Rato on Friday said the ECB should keep rates on hold because there were no inflationary pressures building up and the economic recovery was not a very strong one. International institutions expect economic growth in the eurozone to slow to around 1.2-1.3 percent this year from 2.1 percent in 2004, and accelerate to around 1.8 percent next year. The 25 ministers are also set to back the European Commission’s view that Hungary has not done what it was expected to do to bring down its budget deficit below the EU ceiling of 3 percent of gross domestic product, diplomats said. The ministers will be briefed on progress in simplifying cross-border tax obligations for firms and discuss the fate of the reduced minimal value-added tax rates that some sectors in the EU, like restaurants or the construction sector, now enjoy but which expire at the end of this year. Meanwhile Austrian Chancellor Wolfgang Schuessel said again yesterday Europe should be more flexible on the budget deficit rules for the eurozone in order to invest more in research and infrastructure. «If we brought in a little bit more flexibility with the stability pact (the treaty including eurozone budget rules) for that purpose we would achieve a lot,» Schuessel said.