Rate cut row mars summit

Gerhard Schroeder inflamed the row

The European Union has called for the European Central Bank (ECB) to take "further decisive action" in easing monetary policy in order to boost the eurozone's economy.

But the phrase was quickly dropped from a draft EU statement after objections from the chairman of the European Central Bank Wim Duisenberg.

The text was watered down to say that weak inflation provided room for manoeuvre on monetary policy.

The EU is not supposed to have any say over the decision of the ECB which is strictly independent.

Chancellor Schroeder fuels row

The revised version of the statement read: "A further improvement in inflation prospects and the maintenance of wage restraint would provide room for manoeuvre for monetary policy".

Mr Duisenberg told a news conference that he had made comments on the initial draft but that he was very happy with the final version.

The ECB's policy is always reasonable. But it could still be more reasonable

Gerhard Schroeder

And Belgium's Finance Minister Didier Reynders was quick to stress that the EU's first statement had been an observation rather than a demand.

But the row was inflamed later on Friday by German Chancellor Gerhard Schroeder who publicly suggested that the bank could do better.

"I am more than respectful of the ECB's independence. Its policy is always reasonable. But it could still be more reasonable," said the leader of Europe's largest economy.

Mr Duisenberg, who has cut interest rates once since 11 September to 3.75%, is under political pressure to do so again.

His policy has been noticeably less aggressive than that of his American counterpart, Alan Greenspan.

Other summit business

Also at the summit, leaders heard that the aftermath of the 11 September terrorist attacks would shrink the 15-member bloc's economic growth to 1.5% during 2001 and 2002.

It is also likely to boost unemployment, as already demonstrated by the string of job cuts made this month.

Also discussed was the need to sustain momentum in implementing the new measures to combat money-laundering and freeze terrorist assets.

And Mr Duisenberg gave a presentation on preparations for the roll-out of notes and coins of the single currency in just 73 days time.