ECB cuts rates, local banks set to follow

The European Central Bank (ECB) yesterday cut interest rates a half point, from 3.75 percent to 3.25 percent, acknowledging the need to help the European economies at a time of rapid slowdown. This decision is most likely to lead to domestic commercial banks cutting their own deposit and lending rates and is the result of widespread concern over economic developments, such as those that were expressed at the most recent meeting of economy and finance ministers in Ghent. These concerns were conveyed to the Cabinet yesterday by Prime Minister Costas Simitis and National Economy Minister Nikos Christodoulakis. Reliable sources say that the forecasts being made in Brussels and Frankfurt, where the ECB is based, see a much greater slowdown in economic activity than that which was originally expected. It is now estimated that the eurozone’s growth rate may drop below 1 percent while Germany may show a negative rate in the last quarter of this year. Furthermore, signs coming from the USA are not positive, with a drop in consumer confidence, a drop in investments. Doubts are being voiced as to the effectiveness of an aggressive monetary policy, which jeopardizes the potential for a recovery even in the second half of 2002. In this climate, the Greek government is considering the possibility of adopting defensive measures, such as supporting domestic economic activity. The commercial banks are expected to reduce their lending and deposit rates in the next few days. The cuts will be smaller in mortgages, at about a half-point for working capital, and probably larger in consumer loans on account of competition. Yesterday, Turkish-Cypriot leader Rauf Denktash said he had written to Cypriot President Glafcos Clerides and proposed a face-to-face meeting to seek an end to Cyprus’s division. I think a sincere dialogue with Clerides will be useful, he told reporters in Turkish-occupied Kyrenia. He said they should meet face-to-face in Cyprus, with no predetermined agenda and no preconditions, with the participation of no third party, the Agence France-Presse reported. Clerides met in New York with UN Secretary-General Kofi Annan yesterday.

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