EUROPEAN CENTRAL BANK: TRICHET CONFIDENT BUT VIGILANT IN FACE OF SPIRALLING OIL PRICES.

Not surprisingly, the ECB President brushed off doom mongers regarding the increase in oil prices. Instead, Jean-Claude Trichet quoted the latest estimates from Eurostat. "We believe fundamental positive factors (notably strong demand and wages) in the euro-zone should contribute to consolidating the recovery in economic activity" (the ECB is now anticipating GDP growth in the euro-zone of between 1.0 and 1.6% in 2005 and between 1.3 and 2.3% in 2006).

But Jean-Claude Trichet did not rule out future threats as a result of rising oil prices, increases which experts suggest are likely to persist. "The situation has clearly been complicated by Hurricane Katrina", said Mr Trichet. The ECB President suggested that under normal circumstances, hurricane damage has only a national impact, generally offset by the positive impact of reconstruction on economic activity. "At the present juncture, we believe the global impact is likely to be limited", though this will not prevent the ECB from monitoring and regularly reassessing the situation.

Regarding the impact of high prices on consumption, the ECB is now anticipating a "significant" increase in inflation rates above initial forecasts (between 2.1 and 2.3% in 2005 and between 1.4 and 2.4% in 2006). Mr Trichet above all warned member states against a possible second inflationary wave linked to wage increases. "Social partners must continue to shoulder their responsibilities", said the ECB President. Driving the nail home he told MEPs: "our message is clear: there can be no question of making the productive sector shoulder the additional burden linked to rising oil prices", as was the case during the first oil crisis (1973-74), "weakening the European economy over the long term".

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