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Germany’s economic growth more or less ground to a halt in the second quarter, in another downbeat sign for the global economy.

Its quarterly growth of only 0.1 percent was way below market expectations for a 0.5 percent increase, and follows hard on the heels of similarly disappointing readings for France and the United States.

Until now Germany’s economy, Europe’s biggest, had been growing strongly as its world-renowned companies tapped export markets all around the world, particularly in faster-growing emerging countries. Its industrial prowess had in many ways cushioned it from a government debt crisis that’s afflicting the 17 countries that use the euro.

Germany’s state statistical agency said Tuesday that lagging consumer spending and construction investment were largely behind the growth slowdown in the April-June period.

As well as being below expectations, the second-quarter figure was way down on the 1.3 percent growth recorded in the first quarter, when the economy was boosted by strong exports of cars and industrial machinery. That figure itself was revised down from 1.5 percent in earlier releases.

Top German corporate executives have cautioned that growth could be less impressive in the second half of the year due to volatile raw material prices and economic and financial turmoil over the heavy levels of government debt in Europe and the U.S.

The second-quarter figure looked better compared with the same quarter a year ago, rising 2.7 percent.

Slowing growth in Germany weighs on overall growth in the eurozone. A slowdown in the zone’s biggest country would give the European Central Bank more reason to avoid more interest rate increases this year. Analysts said the German figures may mean that eurozone economic growth for the quarter _ due later _ could well be below the 0.3 percent forecast.

“The weak data for Germany follow recent numbers showing zero growth in France in the second quarter, and raises concerns that the euro area’s hitherto strong core countries are undergoing a much deeper than previously thought soft-patch,” said Chris Williamson, chief economist at financial information company Markit.

It’s not just Europe that’s slowed down. The U.S. economy is growing at a far slower rate than previously thought while figures Monday showed Japan contracted further in the second quarter in the wake of March’s devastating earthquake and tsunami.

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ArcelorMittal, the world’s largest steel maker, remains optimistic about the second half of the year even though it posted an 11 percent decline in second quarter profits.

The company said Wednesday that its net profits in the three months to June 30 fell to $1.54 billion from $1.71 billion a year earlier. The decline was mostly due to last year’s profits being inflated by a $555 million one-off gain related to convertible bonds.

When stripping out the results of discontinued operations, net profit would have been down only 2.8 percent.

Sales jumped 25 percent to $25.13 billion from a year earlier and 13 percent from the previous quarter, thanks to higher average steel prices.

The world’s steel makers, which were hit hard during the global financial crisis as construction and car production plunged, continue to struggle with a slow recovery in demand in the U.S. and Europe. Cheaper imports from countries like China have also weighed on results in recent years.

However, Luxembourg-based Arcelor said it expected demand to continue to build up again, leading to higher steel shipments in the second half compared with a year earlier.

Chief Executive Lakshmi N. Mittal said his company had delivered a “strong performance” in the second quarter and that the seasonal drop-off in the third quarter is unlikely to be as pronounced as last year.

“Overall the group’s performance in the second half of 2011 should compare favorably with the second half of 2010,” Mittal added.

Investors reacted favorably to the statement, sending the company’s share price higher even as the wider markets continue to decline over concerns over the U.S. debt situation. ArcelorMittal shares in Amsterdam were trading 2 percent higher at euro22.64.

Arcelor’s positive outlook for the second half contrasts with a more pessimistic view from United States Steel Corp., which said Monday that it expected its third-quarter profit to fall, pointing to uneven economic recovery in the U.S. and Europe as well as the debt troubles in both regions.

Arcelor’s Chief Financial Officer Aditya Mittal told reporters on a conference call that the uncertainty over the fiscal situation in both the U.S. and Europe has not yet affected the company. In the U.S., Republicans and Democrats are locked in a fight over raising the country’s debt ceiling, while in Europe, investors continue to fear the debt crisis could engulf big economies like Italy and Spain.

However, Mittal added that bad developments in both regions were the main threat to expected higher shipments in the fourth quarter.

Apart from fluctuating demand for steel, the other big challenge for steel makers has been rising raw material prices. Arcelor has been working hard to mitigate that uncertainty, primarily by buying up its own iron ore and coal reserves.

In the second quarter, Arcelor’s own iron ore production rose 11 percent from the previous three months, while coal production increased 7 percent.

The company has also launched a joint $5 billion offer for Australia’s Macarthur Coal Ltd. together with U.S.-based Peabody Energy Corp. Macarthur makes pulverized coal, one of the key raw materials needed for making steel.

Aditya Mittal said the companies are currently conducting due diligence on Macarthur and would then decide whether to make their offer binding.

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U.S. stocks indexes inched higher Friday, trimming their losses for the week. The gains were held back by a budget deadlock in Washington and worries that Europe’s debt crisis could spread.

The stock market was headed for one of its worst weeks this year. Indexes have fallen four of the past five days after Italy appeared to be the next European country headed for a fiscal calamity.

Those concerns ebbed after Europe’s banking authority said only eight banks failed the latest round of tests designed to show how well they would stand up under severe financial strain. A total of 90 banks were subject to the tests.

The market opened higher after Google Inc., Mattel Inc. and Citigroup Inc. all reported strong quarterly earnings. Buyout offers for Clorox Co. and Petrohawk Energy Corp. also lifted stock prices.

The Standard & Poor’s 500 index rose 3 points, or 0.3 percent, to 1,312 in afternoon trading. The Dow Jones industrial average rose 14, or 0.1 percent, to 12,451. The Nasdaq composite index rose 18, or 0.7 percent, to 2,781.

In Washington, lawmakers and President Barack Obama made little visible progress in negotiations over raising the nation’s borrowing limit ahead of an Aug. 2 deadline. Credit rating agency Standard & Poor’s said Thursday there is a 50 percent chance it will downgrade the government’s credit rating within three months because of the impasse. A day earlier, Moody’s Investor Service said it is reviewing America’s bond rating for a possible downgrade.

Many analysts believe that a default by the U.S. is unlikely and would be corrected quickly. But concerns about Europe and a weak data on U.S. factory output continued to weigh on stocks, as they have since early this spring.

Those worries have kept traders’ expectations and stock prices relatively low, said Ryan Detrick, senior technical strategist Schaeffer’s Investment Research. If corporate earnings remain strong and Europe stabilizes, he said, stocks might rally in the second half of the year. That happened last year, after fears about Europe held the stock market back all summer.

“With all the talk about European debt and the U payday loan lenders.S. issues, the fact that earnings are coming in pretty strong is a good sign,” Detrick said. “Once those issues work their way through the system, long-term growth is going to come from earnings.”

The government said early Friday that U.S. factories produced fewer autos in June and overall factory output was flat. It was third straight weak month for manufacturers. Auto production declined in all three months because automakers were unable to obtain parts after the earthquake and tsunami disaster in Japan.

Major indices are down for the week following two weeks of gains. The S&P 500 is down 2.4 percent, the Dow 1.7 percent. Traders hoped to extend recent gains after an eight-week slump fed by Europe’s worsening debt troubles.

Mattel shares rose 2 percent after the company said its net income jumped 56 percent in the second quarter, helped by strong demand for Barbie and “Cars 2″ toys.

Google jumped 13 percent, the most in the S&P 500 index, after the company said its income increased 36 percent from the year-ago quarter and revenue hit an all-time high. Google reported after the markets closed Thursday.

Clorox Co. shares surged 8 percent after billionaire investor Carl Icahn offered to take the company private in a deal that values the household products company at $10.2 billion. He offered 12 percent more for shares than they were worth at Thursday’s close.

U.S. oil and gas producers rose after Australian natural-resource giant BHP Billiton Ltd. said it would buy Petrohawk Energy Corp. for $12.1 billion, feeding speculation about which company might be the next takeover target. BHP was attracted to the long-term value of Petrohawk’s U.S. natural gas reserves.

Petrohawk shares soared 63 percent, lifting other companies with natural gas holdings. Among the strongest gainers: Range Resources Corp. rose 10 percent, Cabot Oil & Gas Corp. rose 9 percent and Pioneer Natural Resources Co. and Southwestern Energy Co. rose 8 percent.

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This is one anniversary few feel like celebrating.

Two years after economists say the Great Recession ended, the recovery has been the weakest and most lopsided of any since the 1930s.

After previous recessions, people in all income groups tended to benefit. This time, Americans are struggling with job insecurity, too much debt, and pay raises that haven’t kept up with prices at the grocery and gas station. The meager gains are going to the wealthiest.

Workers’ wages and benefits make up 57.5 percent of the economy, an all-time low. Until the mid-2000s, that figure had been remarkably stable

World markets fell Friday despite positive economic data out of the U.S., as a political shake-up in Greece added to worries that the country might be forced to default on its debt.

Oil prices fell below $93 a barrel, while the dollar strengthened against the euro amid Greece’s debt woes. The greenback slipped against the yen.

Japan’s Nikkei 225 index closed 0.6 percent lower at 9,351.40, as export shares _ including autos and consumer electronics _ slid on a strengthening yen. Panasonic Corp. lost 1.3 percent, while Sharp. Corp. fell 1 percent. Honda Motors Corp. lost 0.9 percent.

Hong Kong’s Hang Seng index fell 1.2 percent to 21,695.26. South Korea’s Kospi index was 0.7 percent lower at 2,031.93, with high-tech behemoths leading the slump. Samsung Electronics, the top global manufacturer of flat screen televisions, memory chips and liquid crystal displays, skidded more than 3.4 percent while computer memory chip leader Hynix Semiconductor tumbled 6.1 percent.

Australia’s S&P ASX 200 rose 0.1 percent to 4,484.90, but gains were muted by a slide in shares of Woodside Petroleum, which lost 3.8 percent after the company announced cost overruns and delays in its Pluto liquefied natural gas project. Benchmarks in Singapore, Taiwan, Indonesia and Malaysia were also lower.

Mainland Chinese shares fell to their lowest level so far this year as investors reacted to news of a rise in the rate for Chinese central bank’s three-month bills on Thursday, seen as a cue that an interest rate hike may be in the offing.

The Shanghai Composite Index fell 0.8 percent to 2,642.82, while the Shenzhen Composite Index fell 1.1 percent to 1,085.11. Shares in nonferrous and cement companies weakened.

“It seems like the darkest time when an interest rate hike is coming. Shares could rally after that, although the gains will be limited,” said Peng Yunliang, an analyst based in Shanghai.

Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. plunged 10 percent following recent gains due to a policy change that gives the company a monopoly over northern China’s rare earths production, while Fujian Cement Inc. lost 2.5 percent.

Outside of China, the market dip was largely attributed to fears of a Greek default, which could push up borrowing costs elsewhere, lead to crises in other indebted countries, and hurt the European banks that hold a lot of Greek bonds loan for people with bad credit.

On Wall Street on Thursday, better-than-expected reports on home building and jobs pushed two of the three major stock indexes higher. The Dow Jones industrial average gained 0.5 percent to close at 11,961.52. The S&P 500 rose 0.2 percent to 1,267.64. The Nasdaq composite lost 0.3 percent to 2,623.70.

The pace of new home construction quickened last month and the number of people who applied for unemployment benefits fell last week to 414,000, more of an improvement than economists expected. Weekly applications for unemployment have been over 400,000 since April, a rate that suggests job growth is still slow.

Not all the economic news was positive. A survey by the Federal Reserve Bank of Philadelphia found that manufacturing slowed in that region, one day after a similar report found that manufacturing was slowing in the New York area. A series of weaker economic indicators over the past two months have led some analysts to trim their expectations for the year.

Benchmark oil for July delivery was down $2.23 to $92.74 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 14 cents to settle at $94.95 on Thursday.

The dollar dropped to 80.45 yen from 80.78 yen. The euro slipped to $1.4210 from $1.4141 late Thursday in New York.

The euro was being driven lower as worries grew that Greece could run out of money this summer because internal political chaos is preventing budget cuts demanded by the International Monetary Fund. The common euro currency, used by 17 countries, was up to near $1.47 just a week ago.

On Friday, Greek Prime Minister George Papandreou replaced his finance minister in a government reshuffle intended to counter widespread anger over tough new austerity measures and to address demands for faster reform from Greece’s debt monitors at the European Union and International Monetary Fund.

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A flurry of corporate deals is helping to lift the stock market out of its rut.

Stocks rose on Monday after Wendy’s/Arby’s Group said it would sell control of its Arby’s business to a private equity firm. VF Corp., whose brands include Wrangler and The North Face, also said it would buy boot maker Timberland for more than $2.2 billion.

The deals gave investors some much-needed confidence. In early trading, the Dow Jones industrial average is up 43, or 0.4 percent, at 11,996. The Standard & Poor’s 500 is up 4, or 0.3 percent, at 1,275. The Nasdaq is up 8, or 0.3 percent, at 2,652.

Weak economic news has sent stocks lower for six straight weeks. On Friday, the Dow fell below 12,000 for the first time since March.

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HELSINKI

Singapore Prime Minister Lee Hsien Loong’s People’s Action Party retained power with the smallest margin of popular votes since independence amid a record turnout that tripled the number of opposition members in parliament.

The party that has ruled Singapore for more than five decades won 81 out of 87 parliamentary seats and 60.1 percent of the popular vote in yesterday’s polls, according to the Elections Department. A record 2 million ballots were counted.

The run-up to the election brought out tens of thousands of Singaporeans to rallies in support of the PAP and the opposition parties, which resonated with citizens complaining about the rising cost of living and competition with foreigners for jobs and housing. The result adds pressure on Lee, 59, to reach out to the growing number of Singaporeans who have questioned government policies.

“The political landscape has changed forever,” Suzaina Kadir, a senior lecturer at Singapore’s Lee Kuan Yew School of Public Policy. “There’s serious questioning of the PAP’s continued dominance. Now the work begins for the opposition.”

Politicians competed in single-seat wards or multiple-seat districts called Group Representation Constituencies, or GRCs. The party that gets the most number of votes in a district sends all its members to parliament. The PAP lost a GRC for the first time in this election. A record 82 parliament seats were contested by six opposition parties.

Opposition Advances

The Workers’ Party won the five-seat district of Aljunied and the single-seat Hougang constituency, the only wins by opposition parties. Secretary-General Low Thia Khiang and Chairman Sylvia Lim, who called for a stronger voice in parliament and more affordable public housing, led the Aljunied effort, while Yaw Shin Leong won in Hougang.

“Your votes tell the world that you want Singapore to mature as a democracy, and you want to tell the government that you want a more responsible, inclusive, transparent, accountable government,” said Low, who has been in parliament since 1991.

The Workers’ Party also fielded lawyer Chen Show-Mao, who advised on deals like Agricultural Bank of China Ltd.’s $22.1 billion initial share sale, in Aljunied.

The only uncontested constituency was that of Minister Mentor Lee Kuan Yew, 87, the Cambridge University-trained lawyer who led the island from British rule and was its first premier. He’s also the father of the current prime minister.

Popular Vote

The parliament dissolved last month had 82 PAP lawmakers, two elected opposition politicians and 10 non-elected members. The PAP won about 66.6 percent of the votes cast in 2006, down from 75.3 percent in the 2001 elections. The worst showing for the PAP before yesterday was 1991, when it won 61 percent of the popular vote.

The PAP has ruled Singapore for more than five decades and delivered a 41-fold jump in gross domestic product, combining a focus on education, homeownership, business friendliness and strict laws to boost the wealth of citizens. Lee’s more recent efforts to spur the economy include the opening of two casino resorts, bringing Formula One races to the island and attracting foreign workers. GDP grew a record 14.5 percent last year.

The party encountered a more vocal electorate than before, prompting a rare apology from Lee for failing to build enough public housing and expand transport links as the population grew. “If we didn’t quite get it right, I am sorry but we will try and do better the next time,” he said at a rally on May 3.

“While voters have given the PAP a strong mandate, many voters including some of those who have voted for us have also clearly expressed their significant concerns, both on issues and on our approach to government,” Prime Minister Lee said in a speech after the victory. “We hear all your voices.”

Ministerial Casualties

Foreign Minister George Yeo, who lost his seat in Aljunied, had promised to lead a push for reform within the party. He was one of two cabinet ministers who lost power in the election, the other one being Lim Hwee Hua.

“There is considerable resentment against the government and its policies and some of them run deep,” Yeo said in an interview with the Straits Times on May 5. “We have to listen harder to what people say.”

Singapore’s economic success has widened the income gap, with the world’s highest share of dollar-millionaire households contributing to higher property and consumer prices, leaving some citizens behind.

Singapore’s Gini coefficient, a gauge of income inequality, rose to 0.48 last year from 0.444 in 2000, according to the statistics department. A reading of zero means income equality, while a reading of one means complete inequality. Inflation accelerated to a two-year high of 5.5 percent in January.

Foreign Workers

The growth and widening income gap has also been fueled by an influx of foreign workers to expand industries such as construction, shipbuilding, hospitality and banking. Foreigners make up more than a third of the population, with only 3.2 million citizens out of 5.1 million inhabitants.

Singapore’s gross domestic product was about S$285 billion ($231 billion) last year, compared with S$6.9 billion in 1960, based on 2005 market prices. The government plans to spend S$6.6 billion on benefits for citizens in this year’s budget to ease the burden of inflation.

“Policies will still be on track, except the big difference is the government will have to articulate them better and communicate them to the citizens better,” said Song Seng- Wun, an economist at CIMB Research Pte. in Singapore.

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Well, that was close.

Halfway through the fiscal year, and countless partisan power plays later, Congress finally managed to reach a deal on the 2011 budget. Its signature feature: $38.5 billion in spending cuts or, as it’s referred to by the key players, "the largest spending cut in American history."

The negotiators came to their senses with only an hour and a half to spare before a scheduled government shutdown.

The brinkmanship is worrisome, given the much more difficult budget battles ahead — namely, raising the debt ceiling and dealing with long-term deficits in the 2012 budget. Handling those as poorly as lawmakers did the 2011 budget would have far worse consequences than a temporary government shutdown ever could.

President Obama is expected to address the long-term debt in a speech this week. But first up for Congress is the debt ceiling, or legal borrowing limit. Treasury has warned that it now expects U.S. borrowing to hit the $14.294 trillion limit no later than May 16.

But here’s the thing: Lawmakers will be on spring break during the last two weeks of April. So in all likelihood they won’t get around to the issue until May, leaving themselves only two weeks to deal with the most dangerous budget issue on the table.

"The closer Congress gets to May 16 without an increase in the debt ceiling, the more anxious markets will become," said Chris Krueger, political strategy analyst at MF Global’s Washington Research Group, in a research note. "This vote is deceptively just around the corner and there is scant attention on Capitol Hill being focused on its ramifications."

A number of lawmakers, such as Michele Bachmann, have said they will not support an increase in the ceiling, mistakenly asserting that doing so would give Congress a license to spend more.

In fact, the license to spend more stems from the laws Congress has already passed that created the commitments the government is legally obligated to fund. Even if Congress never approves another spending increase or tax cut, the country will not have enough revenue coming in to cover all its bills.

The consequences of not raising the debt ceiling would be grave, Treasury Secretary Tim Geithner told lawmakers last week.

"A broad range of government payments would have to be stopped, limited or delayed, including military salaries and retirement benefits, Social Security and Medicare payments, interest on the debt, unemployment benefits and tax refunds," Geithner said.

The Congressional Research Service estimates that the government will need to borrow $738 billion between April 1 and Sept. 30. So unless lawmakers choose to raise the ceiling, they will need to come up with several hundred billion dollars either through spending cuts, tax increases or a combination of the two if the country is going to continue to pay its bills in full.

Of course, lawmakers very well might miss the May 16 deadline because Geithner has said Treasury can employ "extraordinary" measures to stave off the day of reckoning until July 8. But that would force Treasury to have to manage the country’s balance sheet down to the minute to prevent default.

Some conservative lawmakers have said they would only support an increase in the debt ceiling if it’s accompanied by spending cuts. They also refuse to consider tax increases. Some on the left, meanwhile, have vowed to fight any changes to Medicare or Social Security.

Deficit hawks from the left and right, however, say that leaning solely on spending cuts or tax increases to cure fiscal shortfalls will prove too draconian and hard to sustain.

In any case, coming to agreement on any long-term plan — balanced or not — is unlikely to happen in the next month. So don’t be surprised if lawmakers just approve a series of small increases to the debt ceiling while the negotiations continue.

That would mean "more endgames, more threats, all year," as political observer Norm Ornstein put it.

The framework for those negotiations will be the 2012 budget, which is already proving to be a hot potato.

Last week, House Budget Chairman Paul Ryan put forth a proposal that would radically restructure Medicare and Medicaid, reform the tax code and take an ax to the federal budget overall.

Many Democrats were appalled at the drastic cuts, while some conservatives said it didn’t go far enough. Both have promised to proffer their own budget proposals.

Obama will weigh in on Wednesday with his plan for long-term debt-reduction plan, which was noticeably absent from his 2012 budget proposal in February.

As if to prove Ornstein’s point about threats, Levi Russell, spokesman for the Tea Party Express, told CNN that the group isn’t very impressed with the 2011 budget deal. The Tea Party "has a lot more work to do" to get more spending cuts, he said, signaling that he will try to use the 2012 election as leverage.

How the debt ceiling and long-term budget conflicts get resolved is unclear. But it’s fair to assume it will be a very hot summer.

– CNN senior producer Kevin Bohn contributed to this report. 

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European Central Bank council member Yves Mersch said officials may toughen their language on inflation next week, indicating a readiness to raise interest rates in coming months.

“I would not be surprised at most colleagues concluding that we have upside risks to price stability,” Mersch said in an interview in Luxembourg yesterday. With the economy strengthening and inflation in breach of the ECB’s 2 percent limit, policy makers will “inevitably” have to “rebalance our monetary policy stance,” Mersch said, without giving a timeframe.

The ECB, which has kept its benchmark interest rate at a record low of 1 percent for almost two years, is growing more concerned that soaring energy and food prices will drive up wages and entrench faster inflation. At the same time, raising borrowing costs too soon could exacerbate Europe’s sovereign debt crisis by increasing pressure on stressed banking systems in countries such as Greece and Ireland.

The euro rose more than a cent against the dollar to as high as $1.3695 after Mersch’s comments were published. Euribor futures extended a decline, with the implied yield on the contract expiring in December gaining eight basis points to 1.98 percent, as traders added to bets on higher ECB rates. German two-year government notes fell, sending the yield up seven basis points to 1.45 percent.

August Increase?

So far, ECB President Jean-Claude Trichet has said risks to the inflation outlook are “broadly balanced,” though they “could move to the upside.”

Investors today brought forward expectations for the ECB’s first quarter-point rate increase in three years to August from September, Eonia forward contracts show.

“There is a risk now that the ECB may raise before September,” said Nick Kounis, chief European economist at ABN Amro in Amsterdam. “While Mersch is a traditional inflation fighter, even the normally dovish members are sounding hawkish.”

ECB council member Athanasios Orphanides told Dow Jones in an interview published yesterday that the bank “must be ready to act as appropriate to safeguard price stability.” Nout Wellink of the Netherlands said in an interview with the Wall Street Journal published today that the ECB’s key rate may “distort the economic and financial process” if left at 1 percent too long.

Inflation Projections

Executive Board member Juergen Stark said last night that the ECB is “prepared to act decisively and immediately if needed” to maintain price stability, and fellow board member Lorenzo Bini Smaghi said the bank may need to reassess its policy stance.

At the next policy meeting on March 3, the ECB will publish its latest economic projections. Mersch said he expects ECB economists to lift their 2011 inflation forecast to more than 2 percent from 1.8 percent predicted in December. Inflation accelerated to 2.4 percent last month.

“Now the question is what about 2012, will this be a temporary hump or will this translate into a plateau?” Mersch said. “This very much depends on second-round effects.”

Crude oil prices have surged 27 percent over the past six months, pushing up import prices and adding to pressure on labor unions to secure bigger pay increases for workers.

Economic Outlook

Faster growth in countries like Germany, Europe’s largest economy, may also fan inflation. German business confidence surged to a record high this month and expansion in the euro region’s service and manufacturing industries accelerated to the fastest pace in more than four years.

Mersch said policy makers may next week change their view that risks to the economic outlook are “slightly tilted to the downside.”

Mersch, 61, has been touted by some economists as a possible successor to Trichet when his eight-year term ends on Oct. 31. Asked if he’s interested in the job, the Luxembourg central banker declined to comment, saying it’s a question for “the leaders who will make this decision.”

Wellink today declared his interest in the position, telling an audience at the University of Amsterdam that if asked, he would “think about it seriously.” Other possible candidates include Italy’s Mario Draghi and Finland’s Erkki Liikanen.

Before the Fed

Mersch said the ECB is not concerned that raising borrowing costs before the Federal Reserve could drive up the euro’s exchange rate. “We’ll raise rates when we find the situation warrants it, not on the time axis that belongs to market analysts,” he said. “We have no exchange-rate objective.”

The ECB is “fully aware that excessively low interest rates create distortions in the economy,” Mersch said.

Still, he warned against “moving into a posture of over- confidence by trying to make forward commitments in a period where uncertainty is still quite high.”

The ECB has twice been forced to abandon its exit from emergency measures designed to help banks through the financial and debt crises.

Mersch said officials are looking at resuming a “gradual” exit. One step may be to charge banks more when they borrow excessively from the ECB in an effort to wean them off the funds. Some banks have become too reliant on ECB cash after the central bank made unlimited amounts available at its benchmark rate to ease a liquidity squeeze.

“I cannot confirm that the solution that will be announced is a solution that is only a solution where price is affected,” Mersch said. “There can also be solutions where you act on the quantity. I can tell you that we are very far in our decision- making process.”

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