Britannia Radio

This will infuriate most euro members and could well trigger the 
collapse of that currency!  (see my earlier posting - “The Crisis - 
Cause, Effects, and madness!’  which included Ambrose Evans-Pritchard 
on the subject)

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FINANCIAL TIMES   2.10.08 at 12.45pm
ECB holds fire on rates despite recession fears
    By Ralph Atkins in Frankfurt

Eurozone interest rates have been left unchanged at 4.25 per cent by 
the European Central Bank, despite the rapidly-unfolding global 
financial market crisis and the threat of a eurozone recession.

Thursday’s decision, which had been expected, reflected ECB 
policymakers’ continuing fears about inflation pressures across the 
15-country eurozone – at a time when the macroeconomic impact of 
financial market turbulence remains uncertain.

The crisis in the banking sector spread to continental Europe this 
week, with governments having to launch bank rescues in several 
countries. On Tuesday, Jean-Claude Trichet, ECB president, argued 
that banks’ efforts to clean up their portfolios and strengthen 
capital bases, as well as increased risk aversion, “may have 
substantial impacts on the real economy that policymakers should be 
aware of”.

His comments suggested the ECB had become noticeably more pessimistic 
than previously on eurozone growth prospects, at a time when it was 
having to step up significantly its emergency liquidity-boosting 
operations in financial markets. [which aren’t working,  as the banks 
and handing them back at a loss  see earlier posting-cs]

But the central bank has insisted on a clear separation between 
measures aimed at resolving tensions in financial markets and its 
main monetary policy, aimed at combating inflation.

Despite recent falls, the eurozone’s inflation rate of 3.6 per cent 
remains far above the ECB’s target range of an annual rate “below but 
close” to 2 per cent. ECB policymakers have argued that at times of 
financial distress it is even more important to keep inflation under 
control.

The bank, which raised rates as recently as July, sees eurozone costs 
as less flexible than in the US, justifying a tougher monetary policy 
stance, especially with crucial wage negotiations looming in the 
German engineering sector.

Recent economic data suggested that, even before the latest events in 
the US, there was a high chance of the eurozone reporting for the 
three months to September a second consecutive quarter of falling 
gross domestic product – the technical definition of a recession.

The euro traded down to a one-year low of $1.3856 against the dollar, 
before recouping some ground to stand down 1 per cent at $1.3882. The 
single currency also lost 0.7 per cent to £0.7856 against the pound 
and dropped 1.5 per cent to Y146.14 against the yen.
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AND A SNIPPET I ALSO JUST PICKED UP ---
Daily Politics, BBC 2
Sally Keeble: Sarkozy plan won't work
12:21 | 02/10/2008

Sally Keeble, Labour MP

Ms Keeble dismissed French President Nicholas Sarkozy's plan for a EU-
wide banking bail-out saying, "The banking industries in each country 
are quite different.  We need the systems aligned so that there are 
no loopholes, but aren’t identical because we need rescue plans and 
pacakges that are unique to each country.

"If you look at the banking industry in Europe, there’s significant 
difference btween what they do and what we do.  I don’t think they 
should be exactly the same and I don’t think you can get a big 
banking solution."

She also attacked Ireland's plan to guarantee all deposits, saying, 
"they might find it quite expensive if people export their money to 
Ireland.  Of course, for people here, the £50,000 should guarantee 
98% of retail deposits.  For most people, it’ll be perfectly safe.