Financial Times
April 7, 2011
The European Central Bank president has defended a rise in official interest rates as good for the whole eurozone even as preparations began for a bail-out of Portugal, the latest victim of the region’s debt crisis.
Acting against inflation was “in the interests of all members and partners of the single [European] market and single currency”, and would help boost economic confidence, Jean-Claude Trichet, ECB president, said on Thursday.
His comments followed the ECB’s decision to lift its main interest rate from 1 per cent to 1.25 per cent, which economists warned would hit the eurozone’s weakest economies hardest – including Portugal and Ireland.
They highlighted the ECB’s determination to focus on its primary task of combating inflation, even though the US Federal Reserve and Bank of England have yet to start tightening policy.
Portugal’s outgoing government was last night preparing a formal request for a possible €70bn-€80bn ($100bn-$114bn) rescue package, after this week’s dramatic escalation in the country’s fiscal crisis.
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