The European Central Bank is widely expected to keep its key interest rate at a record low 1.0 percent on Thursday, with the focus on eurozone economic prospects and how the Greek debt crisis plays out, analysts said.
"The ECB should hint that official interest rates will be on hold for some time yet," Capital Economics economist Jennifer McKeown said as unemployment hit a eurozone record of 10 percent and plummeting retail sales raised fears a recovery could be derailed.
Meanwhile, "the current Greek crisis has again moved the structural problems of EMU (European Monetary Union) into the focus of interest," Commerzbank chief economist Joerg Kraemer said.
Across the continent, there is concern that serious fiscal problems in Greece and elsewhere threatens the credibility of the eurozone - ECB economist Juergen Stark has publicly warned that Athens must not expect a European Union bailout.
Greek public debt was estimated at 113 percent of gross domestic product (GDP) in 2009 and is set to rise further this year compared with an EU limit of 60 percent. The 16-nation eurozone's first recession has exacerbated fiscal weakness among its members, presenting the ECB with widely contrasting situations.
Germany should wrestle its finances back into shape fairly soon but "peripheral" members like Greece, Ireland, Portugal and Spain must "step up budget consolidation far more than the core countries," Kraemer said. A monetary policy that is right for Amsterdam, Berlin and Paris could thus mean serious problems for Athens, Lisbon and Madrid.
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