BONN, Germany -- The decision by the 11 European nations adopting a common currency to cut interest rates together effectively launches their monetary unification effort a month ahead of schedule and gives the historic project a boost in credibility.
The cuts made Thursday also pleased Europe's left-leaning governments, which have been calling for stronger steps to stimulate economic growth and create badly needed jobs. Unemployment in the 11 nations adopting the euro remains cripplingly high at 10.9 percent.German Finance Minister Oskar Lafontaine, one of the most prominent advocates for rate cuts, hailed the lower benchmark rates that are now nearly unified across the currency bloc at 3 percent.
"This is the right path, and I think now that we have a chance to avoid a too-sharp drop in growth," Lafontaine said Friday in Washington, where he met with Treasury Secretary Robert Rubin and banking officials.
Asked whether Europe had now done enough to stabilize the global economy, Rubin did not directly refer to Thursday's rate cuts, but he said, "Europe has contributed in a very constructive way, and I have no doubt it will continue to do so."
Central bank officials have stressed that the cuts were not made in capitulation to mounting political pressures but to shore up Europe's economies, which have been showing signs of slowing in the face of financial crises in Russia, Asia and Latin America.
In fact, the presence of political pressure made the task of proving the independence and credibility of the new central bank that much more difficult, European Central Bank president Wim Duisenberg said. Many analysts had feared that the new central bank would hold rates steady as a way to prove that it was insulated from political pressure.
"The political pressure that arose in the meantime only made it rather more difficult to actually do something," Duisenberg was quoted as saying by the Financial Times. "We had long discussions about that because it does create a certain stubbornness in the minds of central bankers."
The cuts nearly completed the goal of unifying interest rates among the nations adopting the euro, a key condition to introducing the joint currency on Jan. 1. Italy, which started out with higher rates, cut only to 3.5 percent but is expected to meet the 3 percent rate by the launch date.
Italy's central bank governor, Tommaso Padoa-Schioppa, described the coordinated nature of the cuts as the real start of monetary union. "The importance of this move cannot be overstated," Padoa-Schioppa said in a speech.
Germany's powerful central banker, Hans Tietmeyer, said that the threat to Europe from the economic turmoil in Asia and Russia convinced the central bankers that it was necessary to act.
"It is becoming more apparent that the international setting has created some extraordinary risks and uncertainties, which are beginning to retard the pace of economic expansion in the industrialized countries," Tietmeyer said in Luxembourg.
The 11 countries launching the euro are Austria, Belgium, Ireland, Italy, Finland, France, Germany, Luxembourg, the Netherlands, Spain and Portugal.