The Minister for Finance, Brian Cowen, was among a number of European ministers yesterday who warned the European Central Bank (ECB) against an interest rate rise in the euro zone.
Speaking after a meeting of EU economic and finance ministers, Mr Cowen said that there would have to be clear evidence of the effects of the low interest rates before a rise was justified.
His comments came as the euro hit a two-year low against the dollar as the US currency prospered on the back of bullish sentiment, while the euro was hit by fallout from the unrest in France. The euro hit a low of $1.1711 before recovering to $1.1777, down 0.3 per cent compared with late on Monday.
"The European economy is not at its most robust at the moment and my point is that you would have to see very clear evidence of second-round effects, which would affect inflationary pressures," said Mr Cowen.
In a similar vein, Austria's finance minister, Karl-Heinz Grasser, said: "Given the gradual recovery that we are in, we should take a steady-hand approach, especially when core inflation is only 1.5 per cent."
The ministers were speaking following a warning from ECB president Jean-Claude Trichet that rates could move at any time.
The Ecofin meeting was also given a report by the internal markets commissioner, Charlie McCreevy, on the obstacles to cross-border banking.
A fragmented banking market, supervisory rules which drive up costs and legal and structural rigidities stand in the way of cross-border financial operations, he said.
Speaking afterwards Mr McCreevy said that he favoured legal action against Italy over the way the country's central bank handled two bank takeovers this year.
A legal challenge by the European Commission would mark a surprise escalation in its struggle with Antonio Fazio, the governor of the Bank of Italy, over his alleged protectionist policies.
Mr Fazio has been widely attacked for allegedly seeking to improperly shield two Italian banks from takeover bids by ABN Amro, the Dutch bank, and Spain's Banco Bilbao Vizcaya Argentaria.
Mr Fazio, who is appointed central bank governor for life, has refused to resign despite calls to do so from Italy's prime minister and two successive finance ministers.
The commission has repeatedly criticised Mr Fazio's conduct, but was thought to be wary of taking legal action against Rome for breaking EU laws.
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