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September 07, 2011

Europe Bank Leader Sees 'Intensified' Risks

The head of Europe's central bank says threats to the economy in the 17 nations that use the euro have sharply increased, and growth prospects have diminished.

European Central Bank President Jean-Claude Trichet said Thursday that the euro-bloc countries face "particularly high uncertainty and intensified downside risks." He said the bank's staff is now projecting economic growth this year of no more than 1.8 percent, perhaps less, and down from a 2.3 percent prediction in June. The bank also cut its estimates for 2012.

Trichet said, however, that officials are now less worried about inflation. He said the bank will keep its key interest rate at 1.5 percent and not raise it for some time.

His negative assessment about the European economy came as other officials voiced new complaints about the pace of debt-ridden Greece's effort to implement austerity measures to cut its deficit.

Dutch Finance Minister Jan Kees de Jager said that as a "last resort" Athens should be kicked out of the eurozone if it "doesn't want to fulfill its obligations." German Finance Minister Wolfgang Schaeuble said Greece's financial prospects are "teetering on a knife's blade" and that its government had to reduce its debt before it could receive the next installment of the $154 billion bailout it secured last year.

As Athens works to assure international auditors of its intent to cut spending and impose new taxes, it is also working toward winning approval from the other 16 eurozone nations for a second $153 billion bailout negotiated in July. But Greece's austerity budgeting has proved to be highly unpopular with voters. Greek taxi drivers, hospital doctors and dentists walked off their jobs Thursday in protest.

Debt-plagued Ireland and Portugal have also been forced to secure bailouts from their European neighbors and the International Monetary Fund. Portugal, Western Europe's poorest country, said Thursday its economy stalled in the April-to-June period, which actually was an improvement from the previous two quarters when it contracted.

Some information for this report was provided by AP, AFP and Reuters.