ECB chief fends off pressure for rate cut

Cheap credit cannot solve all Europe's economic problems, European Central Bank President Jean-Claude Trichet said yesterday, while urging governments to do their bit to raise growth levels.

Fending off pressure for a quick cut to official interest rates and attacks on the euro after failed votes on the EU charter, Mr Trichet said Europe needed a comprehensive economic policy to boost growth and create jobs.

"It is clear that a good monetary policy cannot deliver all that we are aiming at," he said in accepting an award for the ECB at the New Economy Forum in Madrid.

"To be at the level that we are aiming at in terms of ... actual growth and job creation, we need not only to have a good yield curve," he said. The ECB can deliver low interest rates and a credible monetary policy. This will give investors confidence that inflationary pressures will be contained and ensure that market interest rates are low. But that is insufficient to lift Europe's sluggish pace of growth, he said.

Governments must pursue an agenda of market reforms and the rigorously implement budgetary rules to raise Europe's growth level, he said. The 12-nation bloc is growing below 2 per cent.

Mr Trichet said he was confident Europe would overcome its difficulties after French and Dutch voters' rejected the EU constitution, which fanned concerns about the future of the union .