PARIS, July 7 (Reuters): France said Monday it hoped the latest rise in Eurozone interest rates was a one-off, setting the stage for a meeting where European Central Bank (ECB) chief Jean-Claude Trichet will explain the move in person to the bloc's finance ministers.
While politicians acknowledge that high fuel and food prices are a serious problem, Paris and Madrid, with some support from Berlin, fear ECB rate rises will do little to tame inflation and a lot to compound a downturn in economic activity.
France, which has just taken over the rotating presidency of the European Union, renewed its questioning of ECB strategy in a newspaper interview given by Economy Minister Christine Lagarde.
She said she was only "half satisfied" by the ECB's decision last week to raise its key rate to 4.25 per cent from 4.0 per cent as it would heighten an imbalance with the United States and keep the euro overvalued.
"With rates at 4.25 per cent in Europe against 2 per cent in the United States, we will stay with an overvalued euro and a weak dollar," said Lagarde.
Lagarde attends the Eurozone meeting in Brussels later Monday and will chair a second session Tuesday when the talks are widened to all 27 EU countries.
The ECB's rate hike was defended, surprisingly, by Italian Prime Minister Silvio Berlusconi, who has often criticised the bank's monetary policy as bad for economic growth.
But Spain, where a housing boom has turned to bust, makes no secret of its reservations about the collateral damage from the ECB's inflation-fighting strategy.
German Finance Minister Peer Steinbrueck urged the ECB to move carefully too, though his position wavers more than that of Paris because of Berlin's more fundamental fear of inflation.
