Last week's rate rise will not hurt euro-zone growth, European Central Bank chief economist Mr Otmar Issing said last night. He also said inflation in Ireland, the highest in the euro zone, stood out, but the main cause was higher tobacco taxes.

Speaking in London, Mr Issing said last week's interest rate rise would "not have any detrimental impact".

Asked if the rate rise could have an adverse effect, particularly as it coincides with a recent recovery in the euro exchange rate, he said: "We've always said the euro was entirely based on internal price stability and our decision last week has contributed to maintaining price stability in the euro area."

On the pace of structural reforms in the euro zone, he added that while they were still not enough and too slow, many reforms were going in the right direction.

Mr Issing said the euro's past weakness would put upward pressure on prices until it was reversed and that its decline had not reflected economic fundamentals.

"The euro system has expressed concern about the depreciation of the effective recent exchange rate of the euro since, until it is reversed, it imposes upward pressures on consumer prices in the euro area," he said. Mr Issing was upbeat about the outlook for the euro-zone economy, saying the prospects for strong and non-inflationary growth in the area were better than they had been for many years.

"The intolerably high unemployment is and remains the main economic and social problem of the euro area," he added.

Mr Issing said the euro area could not exploit growth and employment unless reforms were brought in to make labour markets more flexible. He also stressed the need for less regulation in product markets and lower taxation.