Wim Duisenberg will be in charge of setting interest rates across the new euro zone when monetary union begins on 1 January 1999.

Despite the economic downturn, Mr Duisenberg said conditions were still in place for a successful launch of the first wave of the new single currency.

He also said that there was a limit to the role the ECB could play in reducing unemployment in the EU.

Independence 'vital'

Mr Duisenberg said the ECB needed to be truly independent if it was to achieve its goal of stable prices.

Wim Duisenberg expects the euro launch to be successful

"Monetary policy decisions taken with too close a political involvement tend to take too short a time horizon into consideration," he said.

"The consequence is that in the longer term such decisions do not support sustainable gains in employment and income but only lead to higher inflation."

Dr Duisenberg said that although growth in Europe would be weaker next year, it should remain strong enough to support continued job creation with things improving the following year.

"Although the economic outlook may be less favourable than expected, let us say, half a year ago, I believe that the conditions for a successful launch of the euro are in place," he said.

His comments follow remarks by Brussels economics commissioner Yves-Thibault de Silguy who warned on Thursday that it would be "madness" to abandon sound finances to create jobs.

The commissioner's remarks were seen as a rebuke to the German and French governments which have been pressing for high-spending job creation programmes to tackle EU unemployment.

Unemployment concerns

Dr Duisenberg said he shared the deep concerns about the "unacceptably high" level of unemployment in Europe and said the ECB would do what it could to help.

"By maintaining price stability, inflation expectations and interest rates can be kept at a low level," he said.

"This creates a stability-orientated environment which fosters sustainable growth, a high level of employment, a fair society and better living standards.

"Moreover... if production, inflation and employment all move in the same direction, monetary policy can play some role in stabilising output and employment growth without endangering price stability."