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Property finance in Europe on hold

3 June 2005

The European Central Bank (ECB) has decided to keep interest rates unchanged for the 24th consecutive month.

The rate will remain at two per cent for the Eurozone as the ECB continues to be hit by troubles.

The cebr reacted to the news by remarking the ECB is "increasingly being torn apart".

It explained by saying: "On the one hand by calls from member states to relax interest rates in the light of their weak economies and on the other, by an excessively liquid monetary market."

The latter is currently fuelling house price inflation in countries such as France, Spain and Ireland.

The cebr continued: "As economic analysts continue to revise Eurozone growth forecasts down, the ECB continues to postpone its next move - a decision that will affect its credibility, particularly amongst monetarists."

For some time now the ECB has been looking to increase interest rates, feeling they are too low.

It argues that the rigid economies of the eurozone cannot be saved by interest rates, which are already low.

However, the cebr also outlined its major concern: that the euro could be destabilised and cause bond interest spreads to widen between countries in the Eurozone.

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