ECB rate hikes may crimp the European economic rebound
The European Central Bank has its reasons for hiking interest rates - and come Thursday afternoon, it will be five rises in eleven months -- but many are increasingly worried that the central bank will kill Europe's nascent economic recovery. It's not all the fault of the bankers who gather in Frankfurt each month. A slowing, or possibly contracting, U.S. economy is a worry. So too is a planned three percentage point hike in German value-added-taxes, as well as a plan by the Italian government to lift taxes to trim its budget deficit. But the ECB, which sets interest rates in the 12 countries that use the euro as their currency, is seen by economists, investors and companies alike as a key reason why European economic growth may slow, perhaps considerably, next year from the 2.5% it's expected to expand in 2006.
Jean-Claude Trichet, the president of the ECB, said in an interview published a few weeks ago that the U.S. worries may be overdone.
"What counts for us right now is the overall economic situation, on a global level, and therefore not just in the United States," he said.
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