Vienna, Oct. 11 (Bloomberg) -- The European Central Bank kept its benchmark interest rate at 3.75 percent and suggested its three rate reductions this year are enough to fend off recession. The economy of the dozen countries that share the euro grew 0.1 percent in the second quarter, the slowest pace in more than five years. European companies have announced about 185,000 job losses this year. French confidence is at a three-year low. The central bank reduced borrowing costs on Sept. 17 -- matching a cut by the U.S. Federal Reserve -- the week after terrorists attacked New York and Washington. The Fed has pared rates nine times this year to spur the world's largest economy, which probably shrank last quarter, economists estimate. ``We do not have the feeling that Europe is on the verge of recession,'' ECB President Wim Duisenberg said. ``Reacting to very short-term, maybe tragic, developments in a continuous, panicky way would do more to undermine confidence than strengthen it.'' Executives disagree. ``The ECB would be wise to give a clear signal with a significant cut in interest rates,'' said Wolfgang Dondorf, chief executive of Pfeiffer Vacuum Technology AG, a maker of vacuum pumps. The attacks ``will definitely worsen the current economic slump.'' The euro dropped to as low as 89.93 U.S. cents after the decision, compared with 90.65 before the rate announcement. The yield on the 3 3/4 percent German note due in 2003 rose 9 basis points to 3.48 percent.

`Industry Paralyzed'
DaimlerChrysler AG, Fiat SpA and KLM Royal Dutch Airlines NV said sales will suffer after the attacks on the World Trade Center and the Pentagon. Alitalia SpA said business is down by 30 percent since the Sept. 11 attacks on New York and Washington. ``The industry is paralyzed,'' Austrian Airlines AG Chief Executive Vagn Soerensen said in an interview. ``The terrible things that happened on Sept. 11 made people travel less and everything that's happening in Afghanistan has the same effect.'' The ECB, which has missed its goal of keeping inflation below 2 percent for 15 months, has only pared rates four times since it took charge of rates in 1999. Three quarters of the 22 analysts surveyed yesterday expected a cut before the end of the month. Duisenberg's comments dampened expectations of a reduction this month. The implied yield on the three-month Euribor interest- rate futures contract maturing in October rose 4 basis points to 3.64 percent. A week ago, the yield was 3.53 percent. The yield on the December contract rose 7 basis points to 3.46 percent. ``If we have room for maneuver, it's very little. Events are still rapidly developing,'' said Duisenberg. ``We prefer to keep our powder dry.''

Different From Fed
Unlike the Fed, which also has a mandate to boost employment, the ECB's main task is to combat inflation. ``They're conservative and very different from the Fed,'' said Stephane Deo, an economist at UBS Warburg in Paris. ``It's too close to the last time for them to move again.'' The ECB's 18 policy makers say they don't vote and reach decisions by consensus. The Fed's policy panel, which votes on rates, has 12 members with 2 current vacancies. ``There is definitely some degree of delay,'' said Giles Keating, chief global economist at Credit Suisse First Boston in London. ``None of us is sure how far it is a deliberate choice and how far it is part of their decision-making process.'' Inflation slowed for a third month in August -- to 2.7 percent from a year ago, after 3.4 percent in May -- and may do so again in September. The German inflation rate fell to the lowest in a year, a report today showed. Price increases also slowed in Italy. The ECB's 18 policy makers next meet on Oct. 25.
Companies Hurt
Axa SA, the world's largest insurer, plans to consider job cuts, reduce computer spending and limit the travel of its employees as part of an effort to lower expenses by as much as 1 billion euros ($910 million) next year. Like rival insurers, Axa is facing a business slowdown as slumping stock markets reduce gains from investments and the fees they earn from managing mutual funds and other savings plans. The Paris-based company also is estimating losses of $550 million from the terrorist attacks. Groupe Danone SA said sales in the third quarter rose a less- than-expected 3.7 percent. That's below the 5 percent to 7 percent range the company targets for annual growth. Danone shares fell 8 percent today. The U.S. economy, destination of about 14 percent of the region's exports, probably shrank at a 0.5 percent annual rate in the third quarter and is likely to contract at 1 percent in the fourth, said economists surveyed by Bloomberg News. American companies are the largest foreign investors in Europe.

Stalled Economies
Nexans SA, the world's second-largest maker of cables for office computer networks, said yesterday it expects profit to fall this year after the attacks prompted customers to delay orders. German unemployment in September rose for an eighth time this year to the highest measure in 15 months, adjusted for seasonal swings. Europe's largest economy didn't grow at all in the second quarter, forcing companies to fire workers. French companies grew more pessimistic about economic prospects, the Paris Chamber of Commerce's business confidence survey, compiled after the Sept. 11 attacks, showed. Confidence was the lowest since the survey began, 11 years ago.