The European Central Bank kept its key interest rate on hold Thursday, but raised growth forecasts for the 16-member eurozone as an uneven economic recovery continued. The ECB's main refinancing rate has now been at 1 per cent since May 2009, its lowest level since the introduction of the single currency, with ECB President Jean-Claude Trichet stressing that it was still too early to say the financial crisis was over, dpa reported. "Since we have begun to observe a pickup in growth over the last four quarters, we have never declared victory. We continue to be cautious," Trichet said. Confirmed figures from EU statistic agency Eurostat for gross domestic product (GDP) growth in the second quarter across the eurozone released Thursday paint an accordingly uneven picture. Germany, Europe's self-declared "engine of growth," posted 2.2- per-cent growth in the second quarter, while debt-laden Greece lay at the bottom of the table, contracting by 1.5 per cent. France and Italy posted 0.6 and 0.4 per cent growth, respectively. The ECB's own projections have, accordingly, moved slightly upwards from its June estimate. Growth for the entire eurozone would now come in at between 1.4 and 1.8 per cent for 2010, Trichet said, "owing to a stronger than expected rebound in economic activity in the second quarter. However Trichet stressed that despite more positive news, significant downside risks to the economy remained. "Global trade may continue to perform more strongly than expected ... but concerns still remain relating to renewed tensions in financial markets." Trichet hinted that the still-present risk of a double-dip recession in the US, Europe's largest trading partner, could dampen European performance. That, coupled with ongoing contrasts between Europe's larger and faster-growing economies, led by Germany, and the so-called "periphery" states with debt worries, such as Ireland and Greece, added to the need to retain liquidity support for financial institutions across the bloc. Trichet said the ECB would continue its emergency unlimited liquidity offer to banks at least until January 18, 2011. The measure was first introduced at the height of the credit crunch. "We are still in an uncertain period," he said, but added that a double-dip recession in Europe itself was "not in the cards."
