The president of the European Central Bank (ECB), Mr Wim Duisenberg, yesterday brushed aside talk of an international financial crisis and vowed to resist political pressure to relax monetary policy.

Speaking after a meeting of the bank's governing council, Mr Duisenberg said that recent predictions of financial doom were misguided.

"All the talk internationally about the crisis at hand was in our view, if not exaggerated, somewhat overdone," he said.

Mr Duisenberg condemned calls for a return of capital controls and worldwide uniform interest rate reductions. But he acknowledged that the signs of a slowdown in the world economy could present difficulties for the ECB.

"To say that the formulation of monetary policy will not be easy in the current climate is a statement of fact," he said.

The governing council agreed the main elements of the monetary policy strategy to be pursued by the ECB. The primary objective of Europe's single monetary policy will be price stability, which the bank defines as "a yearon-year increase in the harmonised index of consumer prices (HICP) for the euro area of below 2 per cent".

Mr Duisenberg said that this objective was in line with the current level of inflation in the euro area and he ruled out making any concessions to individual member-states.

"By focusing on the HICP `for the euro area' the governing council of the ECB makes it clear that it will base its decisions on monetary economic and financial developments in the euro area as a whole.

"The single monetary policy will adopt a euro area-wide perspective; it will not react to specific regional or national developments."

Last month's German election result means that most EU governments wants to see monetary policy relaxed in response to global developments. Germany's new Finance Minister, Mr Oskar Lafontaine, wants job creation to become one of the deciding factors in setting interest rates.

Mr Duisenberg dismissed this suggestion, insisting that the Treaty of Maastricht defines price stability as the primary aim of ECB policy. But he acknowledged that political changes in Europe would increase pressure on the bank to change course.

"The pressure could increase; but it will be pressure against a strong institution and we will be able to resist it," he said.

The ECB announced yesterday that 13 billion euro bank notes will be printed in the 11 participating member-states by the year 2002 when they will come into circulation.

The bank is setting up an analysis centre to investigate counterfeited euro notes with a database that can be accessed by all member-states.

Mr Duisenberg welcomed recent rate cuts by a number of euro area countries.

"The (ECB) governing council welcomed recent interest rate reductions by a number of euro area national central banks," he told the press briefing. "As a result, euro area-wide threemonth interest rates have now reached a level of 3.8 per cent, which implies a decrease of around 15 basic points since the end of August."

Last week, the central banks of Spain, Portugal and Ireland cut their key interest rates.

"These changes underline the fact that the process of convergence of central bank rates in the euro area, which is to be concluded by the end of this year, is clearly under way," Mr Duisenberg said.

Further rate cuts would be appropriate as part of the process of convergence, Mr Duisenberg said.

"The governing council considers further interest rate convergence towards the lower end of the current range prevailing in the euro are as being appropriate, given our current knowledge of monetary trends and the prospects of price developments, and taking account of an environment characterised by risks of downward pressures," Mr Duisenberg said.

Germany and France, the economic heavyweights in the euro area, currently have the lowest short-term interest rates at 3.3 per cent.