A senior European Central Bank official cast doubt on Thursday on whether lower interest rates would help resolve the eurozone's long-running debt crisis, dpa reported. "Monetary policy is not an all-purpose weapon for any kind of economic illness," ECB executive board member Joerg Asmussen told a conference in London. "Due to impaired monetary policy transmission, the pass-through of rate cuts to the periphery would be limited, and this is where they are most needed." Asmussen's comments came as the pressure mounts on the ECB to deliver an interest rate cut week at its regular monthly meeting to help shore up economic confidence in Europe. Chancellor Angela Merkel meanwhile said the ECB would certainly have to consider raising interest rates in the case of Germany, a country with a solid economic performance. She conceded that the ECB faces a dilemma as it attempts to find a balance in its monetary policy deliberations between stronger economies like Germany and other parts of the eurozone that are in the grip of recession. "The ECB is in a difficult position," Merkel told bankers in Dresden. "For Germany it would actually have to raise rates slightly at the moment, but for other countries it would have to do even more for more liquidity to be made available." Concerning the ECB's deliberations for a European leader, Merkel said, "I fully support that we have to have to a harmonized interest rates in Europe. If we want to arrive at tolerable interest rates again, we have to overcome the divisions of the European currency area." The ECB's benchmark refinancing rate is already at an historic low of 0.75 per cent. Heavily indebted nations in the eurozone's periphery have been struggling to cut high deficit-and-debt levels in the face of growing frustration among voters and often violent demonstrations. But said Asmussen: "Delaying fiscal consolidation is no free lunch. It means higher debt levels. And this has real costs in the euro area where public debts are already very high."
