Oct. 23 (Bloomberg) -- European Central Bank President Wim Duisenberg, who retires at the end of the month, said he is ``very confident'' about a recovery in the $8 trillion economy of the dozen nations sharing the euro. Economic growth ``will go ever faster in the course of next year and in the year thereafter,'' Duisenberg said in an interview yesterday as he left what he called a ``very moving'' ECB farewell party in Frankfurt. At the end of next year, Europe will grow at an annual rate of ``about 2.5 percent,'' he said, ``and in 2005 we will stay there.'' Under the leadership of Duisenberg, who will be succeeded by Bank of France Governor Jean-Claude Trichet, the ECB has pared its benchmark refinancing rate to 2 percent, the lowest in more than half a century, to prevent the economy from slipping into recession. The bank began setting borrowing costs in 1999. The euro rose against the dollar after Duisenberg's comments. The single currency gained as much as 0.4 percent to $1.1848 and was unchanged at $1.1803 at 12:23 p.m. in Frankfurt. The currency is about 1 percent below May's record of $1.1933. The ECB is ``not worried'' about the euro's current exchange rate, Duisenberg said in a separate interview following a dinner with fellow central bankers late yesterday. His comments suggest the bank sees no need to sell the currency to slow its appreciation.
Euro `Where I Started'
``The euro today is again where it was when I started,'' Duisenberg said, adding that the region's countries are today less exposed to the effect of foreign exchange movements than they were before the introduction of the euro. The currency's 21 percent gain in the past year was among the reasons forcing PSA Peugeot Citroen, Europe's No. 2 automaker, to cut its full-year profit forecast on Monday. German Chancellor Gerhard Schroeder said last month the euro is one of the ``dangers'' to growth. ECB council members Nout Wellink from the Netherlands and Luxembourg's Yves Mersch said Duisenberg's interest rate policy in the past 4 1/2 years leaves Europe's economy ``fundamentally healthy'' and ready to rebound. The current level of interest rates ``is a good starting point'' for a recovery, Wellink said as he left the farewell party. Rates are ``rather low, but not too low,'' Wellink said. ``You have to keep in mind that for instance in Germany you have to go back to Bismarck to find rates as low as they are now in Germany,'' Duisenberg said.
Recovery Signs
Signs are mounting that a recovery in the euro area economy may begin as Duisenberg, a 68-year-old Dutch native, retires. European industrial confidence has risen in the past two months, and the manufacturing and services industries expanded in September. French consumer spending rose at the fastest pace in more than four years in September. Europe's economy ``is fundamentally healthy, but it could grow faster,'' said Bundesbank President Ernst Welteke, another ECB rate-setter, as he left the same party to attend a dinner with his fellow policy makes. Investors expect the ECB to begin raising interest rates from the middle of next year, interest rate futures contracts suggest. The yield on a three-month Euribor contract maturing in June 2004 was 2.42 percent at 12:24 p.m. in Frankfurt, compared with a current three-month lending rate of 2.15 percent. Expectations are mounting that the Bank of England will be first of the world's four biggest central banks to raise rates since 2000, after minutes published yesterday showed four of nine U.K. policy makers voted to raise interest rates this month. //www.bloomberg.com