Finance ministers of Europe's single currency zone took the prospect of another rapid hike in ECB interest rates on the chin during Tuesday talks marked by a renewed show of confidence in the economic outlook.
"The general message is that there is clearly a rebound in the euro zone. There is no doubt at all," French Finance Minister Thierry Breton told a news conference.
Despite some lingering misgivings about the risk of a rising euro or oil prices, ministers said they were happy to see growth accelerating and the European Commission said it would probably raise its growth forecast for this year, from 2.1 percent now.
"It is important that these economic good times are used to our advantage," Finnish Finance Minister Eero Heinaluoma added in a plea to governments to clean up public finances and reduce their deficits. He chaired Tuesday's talks.
Some ministers such as Belgium's Didier Reynders expressed a hint of caution about the need to get the balance right on rate rises and avoid choking off economic growth.
But he also said a stronger euro, something that may happen as rates increase, also helped to offset the expense of oil, which is paid for in dollars and thus cheaper if the euro rises.
Dutch Finance Minister Gerrit Zalm openly expressed support for the European Central Bank, which six months ago was under heavy pressure from politicians to avoid hasty tightening of monetary policy on the grounds that growth was more of a worry than inflation.
"I am supportive of an ECB policy of gradual tightening," Zalm said. Spain's Pedro Solbes said growth was accelerating and more should be done to keep inflation tamed, a concession politicians rarely make to the ECB in its focus on preventing price rises.
France's Breton declined to say whether he expected an ECB rate rise in August but did not seem alarmed by the prospect of another increase. "What I see is that financial markets anticipate reasoned and reasonable ECB behaviour," he said.
Jean-Claude Juncker, chairman of talks the previous evening, sounded at least resigned to a rate rise that financial markets reckon could come as soon as an August 3 meeting of the European Central Bank's Governing Council.
ECB chief Jean-Claude Trichet attended those talks and left without public comment. Juncker made no effort in a post-dinner news conference on Monday to counter the impression that a hike is imminent.
"The president of the ECB was expressing himself over the last weeks in a very clear manner," said Juncker, who is prime minister and finance minister of Luxembourg as well as chairman of euro zone finance ministers' gatherings.
"I don't think that you would be surprised if the (central) bank will behave in the kind of way that the president (Trichet) indicated during his last press conference."
Before last week's ECB meeting and news conference, markets had been looking to a possible rate rise at the end of August but Trichet's tone and decision to hold a physical meeting on August 3 instead of a teleconference changed their minds. The euro zone ministers, meeting with those of the rest of the 25-nation European Union on Tuesday, officially endorsed Slovenia as ready to join the euro zone in January as the currency's 13th member.
European Economic and Monetary Affairs Commissioner Joaquin Almunia said the economy of the euro zone, stuck in the doldrums for years, was accelerating nicely and that he could raise his forecast for 2006 in an update due in September.
One of the main reasons for that is the belief that Germany, Europe's largest economy, is picking up at long last, with the construction sector and consumption showing signs of life in addition to the traditionally strong export industry.
"All indicators suggest we will get a good result in the second quarter," German deputy finance minister Thomas Mirow, standing in for his senior, Peer Steinbrueck, said on Monday.
Trichet said after the ECB left its key rate at 2.75 percent last week that the Governing Council would break with tradition and hold a face-to-face August 3 meeting, not a teleconference, as is usually the case at the summer holiday peak time. The ECB is worried that price pressures are rising, with companies increasingly passing higher costs to customers. Inflation was estimated at 2.5 percent in June and has been above the ECB's 2.0 percent ceiling for a year.