Although the bank conceded that growth had slowed, it said the euro remained weak, money and credit growth was buoyant and recent wage settlements pointed to rising costs. "Taken together, all these factors argue in favour of an unchanged monetary stance."
In a move hinting that the clash between bankers and politicians did not end with the resignation of Oskar Lafontaine, it also criticised member governments. Budget deficits were too high, leaving no margin for them to expand further in an economic slowdown. High debt levels had pushed long-term interest rates higher, it said.
Worse, high tax burdens were "causing substantial disincentives to economic activity," the report said. "Priority needs to be given to removing the structural impediments to a higher level of economic activity in the euro area."