----by Victoria Main----
BRUSSELS (AFX) - Eurogroup finance ministers are expected to express disappointment at a meeting tonight in Luxembourg at the European Central Bank's failure to cut interest rates last week to revive the faltering euro zone economy.
EU sources hinted ECB vice-president Christian Noyer, who will attend the meeting, will come under fire for the ECB governing council decision on Thursday to keep rates on hold. "The ECB will obviously provide food for thought," one source said.
Signs of eurogroup discontent at the decision came on Friday. French Finance Minister Laurent Fabius was reported in the weekend edition of the Financial Times as saying he was pleased rates have fallen since last month's terrorist attacks against the US, "even if the central bank yesterday declined to take a further step as some people -- including myself -- wanted." The FT also reported that Luxembourg Finance Minister Jean-Claude Juncker, who is also prime minister, echoed the French minister's criticism.
Already the previous week, Fabius had called for a rate cut, saying, "it would be important in terms of confidence and a feeling that we are reacting to the situation." Eurogroup spokesman Didier Reynders, who is also Belgium's finance minister, also argued that the ECB has "more room for manoeuvre".
However, ECB president Wim Duisenberg, justifying the decision to keep rates on hold, said the bank has "very little" room to move and that the exceptional 50 basis point reduction on Sept 17 was sufficient for the moment.
Otherwise, EU sources said ministers are likely to arrive at similar conclusions during their discussion on the economic situation this year and next to those reached three weeks ago at their last meeting, in Liege, Belgium.
"Not so much time has passed between Liege and now," one source said.
At that time, European economic and monetary affairs commissioner Pedro Solbes forecast economic growth in the euro zone would be "clearly below 2.0 pct" in 2001 as a result of the downturn exacerbated by the terrorist attacks against the US on Sept 11. A few weeks earlier, growth was forecast at about 2.0 pct or slightly below that level.
Since then however, Solbes has appeared marginally more pessimistic, saying last week that euro zone growth will be "over 1 pct, but clearly below 2 pct" in 2001. Equally, Reynders last week mentioned a lower limit for the region's growth, saying it will be between 1.5 pct and 2.0 pct.
Euro zone economic figures released since the Liege meeting have fuelled fears of recession.
Of particular concern was the fall in the index measuring services sector activity in the euro zone to below 50 in September for the first time ever, signifying contraction. Compounding the bad news was the slump in the euro zone's business climate indicator to minus 0.57 in September from minus 0.46 in August.
At the time, economists concluded the ECB was under pressure to cut rates in a bid to boost growth, even if they agreed with euro zone political leaders and central bankers that the region is not yet in recession.
Also on the eurogroup agenda is the countdown to the introduction of euro notes and coins on Jan 1. A European Commission report released last week concluded that small businesses are still unprepared for the transition and that the Sept 11 attacks have distracted the attention of those involved in the changeover.
The eurogroup will consider moves to crack down on the financing of terrorism and money-laundering as well as following up the discussion on globalisation at the Liege meeting of EU finance ministers. The 2002 budget plans of Austria, Finland, the Netherlands and Spain will come under scrutiny at the meeting. Sources said the proposals are unlikely to pose any problems.
The eurogroup meeting, beginning at 8.00 pm, will serve as a curtain-raiser to Tuesday's gathering of EU finance ministers.