The European Central Bank (ECB) will confront a host of key technical problems tomorrow at its final meeting before the euro's official launch.

With only two weeks before the fledgeling euro takes flight, the ECB must soon choose its marginal lending and deposit rates and ensure that all other technical preparations are in place.

The marginal lending and deposit levels, used to define the upper and lower limits of money market rates, are largely technical and can have virtually no effect on the real economy, economists said.

But they are nevertheless crucial to the smooth functioning of the money markets and banks' daily operations and could help calm any turbulence that occurs during the euro transition.

"The overnight deposit rate and the overnight lending rate are, at least for the first few weeks, going to be critical," said Goldman Sachs' chief economist in Frankfurt, Thomas Mayer. "There is quite a good argument for setting these rates as narrow as possible." The marginal lending rate, equivalent to Germany's Lombard rate, is the overnight emergency borrowing facility and will serve as the upper end of the ECB's interest rate band.

The deposit rate is the rate at which the ECB will pay banks to deposit surplus cash with the central bank overnight and will serve as the lower end of the ECB's rate band.

Mr Mayer said it remains uncertain whether the ECB will be able to steer the euro-zone economy via its key repo facility alone.

"If there is a liquidity shortage, banks will be pushed into the overnight lending facility, and if there is a liquidity flood, they will be pushed into the deposit rate," he said.

Bundesbank council member Ernst Welteke called on the ECB on Thursday to set its money market rates "in as narrow a corridor as possible". Mr Welteke said the rate band should not be more than 50 basis points on either side of the ECB's key repo rate.

Many economists say the marginal lending rate is highly unlikely to exceed 4 per cent.

After a co-ordinated rate cut to 3 per cent by all but one of the euro-zone central banks on December 3rd, ECB chief Wim Duisenberg and Bundesbank president Hans Tietmeyer said the ECB's key rate would now remain steady. That means the ECB council's approval of 3 per cent as the starting repo rate on Tuesday is largely perfunctory.

Mr Welteke said the ECB had to decide on the marginal lending rate at tomorrow's meeting, otherwise it wouldn't be accessible to euro-zone banks by January 4th, the ECB's first business day in 1999. The narrow band should be used only temporarily during the euro's transition period, he went on. "This can only make sense during the transition time, not during normal times," he said.

The most important thing for the ECB will be to ensure that the euro introduction has as few hitches as possible, economists agreed.

"The starting rate for EMU will soon be forgotten, but it would be remembered forever if there was a breakdown in the European financial system because of a technical glitch," Mr Mayer said.

At its previous meeting, the ECB gave a gloomy assessment of the euro zone's economic outlook.

Since the ECB's last meeting, Mr Duisenberg has said there is only limited room for further rate cuts.

"Monetary policy can't do much more," Mr Duisenberg said in a newspaper interview. "Now it's up to others to improve the conditions for growth and jobs.")