The governing council of the European Central Bank (ECB) is expected to leave interest rates unchanged today after president Mr Wim Duisenberg's unusually blunt statement at the European Parliament on Tuesday.

"There has not been any new information that would justify altering monetary policy since the last council meeting," he said. But Mr Duisenberg and the ECB council face a growing dilemma: while leaving interest rates unchanged suits countries like Ireland and Finland where growth remains healthy, it will do little to stop the stagnation in Germany, where the economy is flirting with recession.

When the German Chancellor, Mr Gerhard Schroder, made a barely disguised plea for a cut in interest rates last Friday, Mr Duisenberg no doubt reacted as he always does. "I am a polite man; I listen but I do not hear," he said recently when asked how he deals with such pleas.

But Mr Schroder's comment that the ECB had an obligation to sustain economic growth as well as to contain inflation is likely to hang over today's deliberations in Frankurt.

The Chancellor's comments were spurred by criticism in the last week from economic analysts and opposition parties for failing to intervene to stop the economic slump.

For months, German think-tanks have been pumping out increasingly depressing analyses of Europe's largest economy. First the country's five economic wise men - followed by the government - cut their growth prediction from 3 to 2 per cent. Last week the Munich-based Ifo group went further, halving its growth forecast to 1.2 per cent, making Germany the euro-zone's weakest link.

"We do not expect a recession, understood as negative growth over a number of quarters, but the German economy is at the moment, and in the year 2001 on average, near stagnation," said Mr Hans-Werner Sinn, president of the Ifo.

"The German economy hasn't hit bottom yet," the institute said in its report, adding it expects the ECB to reduce interest rates by a quarter point to 4.25 per cent before next month's summer break. But it may be too little to help Mr Schroder. Last week the chancellor said there was "no reason to give in to panic" over Germany's economic slowdown and that the country was still on target to achieve 2 per cent growth this year.

But he seems to have lost the confidence of his economics minister, Mr Werner Muller, along the way.

"Second quarter growth in Germany may even be zero," said Mr Muller recently. "If that is the case, then full-year growth of 2 per cent will be hard to attain," he added. Similarly hard to attain will be Mr Schroder's goal to bring unemployment under 3.5 million by next year's general election. The number of people out of work, when seasonally adjusted, rose 18,000 to 3.8 million last month and stubbornly refuses to sink.

The German economy is being squeezed from two sides. As the largest economy in the eurozone it is the most exposed, and the most open to what is going on in the rest of the world. Another squeeze on the economy is from within, with the eastern federal states still dragging down the rest of the economy despite a decade of cash transfusions.

Mr Schroder hoped that sweeping tax and pension reform would give the German economy the necessary boost. He hoped too that the ECB would give Germany a boost in the form of an interest rate cut. But the ECB has always said its policies are decided by the needs of the euro-zone as a whole.