Monday, Eurozone policymakers may continue to be non-conventional in boosting bank lending, central bank President Jean-Claude Trichet said, according to excerpts of an interview with the Wall Street Journal.

In the UK, a leading business lobby urged the Chancellor to deliver a confidence-building budget, which would support jobs, investment and competitiveness through the recession and beyond.


It's pretty possible that we would continue to be non-conventional through the channel of bank financing, Trichet told the WSJ. This channel remains for us essential. ECB chief noted that the reason for concentrating bold non-standard measures on the commercial bank channel was based on the fact that 70% of euro area's financing comes from commercial banks and 30% through securities other than stocks.

With regard to the future interest rates, Trichet said the central bank could lower its interest rate on main refinancing operations, currently at a record low of 1.5%, further.

In statistical data, Eurozone's trade deficit widened in January from December, an official report said. Data released by the Eurostat showed that the Eurozone recorded a trade deficit of EUR10.5 billion in January, widening sharply from a revised EUR 1.7 billion deficit in December. Economists expected the trade deficit to be EUR 9 billion in January. Exports plunged an unadjusted 24% year-on-year compared to a 4% fall in December. Imports slipped 23%, after a 6% fall in the previous month.

The Eurostat also announced that the Eurozone construction output rose a seasonally adjusted 1.3% month-on-month in January, compared with a 2.8% fall in the previous month.

Commerzbank AG downwardly revised its forecasts for the German economy, citing the recent collapse of order intake. In a note, Commerzbank chief economist Jörg Krämer said the bank now expects the German economy to shrink 6%-7% this year versus an earlier forecast of 3%-4% contraction.

Further, the bank cut its forecasts for the Eurozone. The 16-nation Eurozone is now seen shrinking 4.5% this year versus the earlier forecast of 2.5%-3% contraction. Other main Eurozone economies, France, Italy and Spain are expected to shrink 3.5%, 4.5%, 4.6%, respectively this year.

However, we stick to our view that the recession will be followed, at best, by an anemic upward movement, Krämer said.

Rest of Europe

In a submission to the Chancellor Alistair Darling before the April 22 budget, the Confederation of British Industry urged for a clear and credible strategy to get the public finances back under control. The CBI warned that the alarming state of the public finances rules out the option of a further significant fiscal stimulus, which would undermine business and institutional investor confidence in the UK.

The Swiss National Bank revealed in a report that the M3 money supply rose 4.1% year-over-year in February, larger than the 3% rise recorded in the previous month.

The Czech Statistical Office announced that the seasonally adjusted industrial production declined 23.3% year-over-year in January, compared with a 14.6% fall in the previous month. Economists were looking for a decline of 18%. Meanwhile, the construction output at constant prices decreased 11.1% annually in January, after a 2.6% decline in the previous month.

Statistics Denmark said that the consumer confidence indicator declined to minus 11.7 in March from minus 11.3 in February. Economists were looking for a reading of minus 9.

Industrial production in Lithuania plummeted 15.3% year-on-year in February, after falling 5.6% in January, the Statistics Lithuania said.

Statistics Iceland reported that the wage index rose 6.7% year-on-year in February, at a slower pace than the 7.5% in the previous month.

Moldova's National Bureau of Statistics announced that the industrial production dropped 26.3% year-over-year in January to February period, compared to the 9.6% rise seen in the previous year.

The Hungarian central bank maintained the policy rate for the second month in a row. The Monetary Council of Magyar Nemzeti Bank left the key policy rate stable at 9.5%, repeating its February move. In January, the central bank had reduced the base rate by 50 basis points.

Over the weekend, the Hungarian Prime Minister Ferenc Gyurcsany had announced his decision to step down. The Hungarian forint took a beating following the development. Economists were divided on their expectations for the latest rate decision considering the uncertainty on the political front. A new premier is expected to be named in three weeks.

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