Finance ministers call for European rate cut after Trichet starts to talk down the euro

The European Central Bank won an early victory in its battle to keep the euro from stifling economic recovery after its warning over the "brutal" exchange rate triggered a rise in the dollar.

The euro tumbled more than a cent overnight after Jean-Claude Trichet, the ECB President, said he was "not indifferent" to the impact of a strong euro.

European politicians hailed his comments and urged him to follow it up with interest rate cuts or foreign exchange intervention if the currency continued to rise.

Didier Reynders, the Belgian finance minister, said the bank should cut rates if the euro hit $1.30 against the dollar. "I have always said ... it will be necessary for the ECB to do something on the monetary level at about $1.30," he told the Belgian parliament.

Wolfgang Clement, Germany's economy minister, said Europe must take action if the euro's strength endangered its exports.

Gerhard Schroder, the German Chancellor, hinted he wanted the ECB to take action, saying the "possibility for action" lay with the bank. He held talks with Alan Greenspan, the chairman of the US Federal Reserve, who said in a speech in Berlin that euro area exporters were under "considerable pressure".

Francis Mer, the French finance minister, said European ministers would use next month's meeting of G7 finance ministers to send a signal to financial markets on the risks of the current trend. "We will try next time we meet to find out together under what conditions we can send the correct signal so that markets realise that different economic zones face the threat of overly serious imbalances," he said.

Analysts believe the US will resist pressures for concerted intervention as its economy will gain from the dollar's slide as exports become cheaper and imports dearer. This would leave the ECB to act alone for the first time since November 2000 when it unsuccessfully tried to drive the euro up from record lows.

Colin Warren at GFC Economics in London doubted it would be more successful this time, especially as there was no clear sign the market was about to turn. "Intervention has tended to be successful when official currency sales or purchases reinforced a shift in market sentiment," he said. "And at the current juncture there is little sign of such a turning point."

Ron Carnell, senior international economist at Commonwealth Bank of Australia, said the ECB might cut rates if the euro approached $1.35 because of the threat to growth.

Meanwhile, oil prices surged yesterday to their highest level since the run-up to the war in Iraq. US prices hit $35 a barrel for the first time since the war, while in London, Brent crude set a nine-month high of $32.12. Prices have surged $8 a barrel, or 30 per cent, since Opec decided in September to cut output by 900,000 barrels or 3.5 per cent.