The President of the European Central Bank (ECB) Mr Jean-Claude Trichet, has characterised the recent rise in oil prices as a "sizeable adverse shock" to the euro-zone economy.

Speaking in Frankfurt after the ECB's Governing Body left interest rates unchanged at 2 per cent for the 17th successive month, Mr Trichet warned that further oil price rises could endanger Europe's economic recovery.

"On the one hand, the magnitude and nature of this shock differ from earlier experiences, when oil price rises were much stronger and mainly due to supply constraints. In addition, the oil intensity of production is significantly lower in the euro area, " Mr Trichet said.

"On the other hand, recent oil price increases constitute a nonetheless sizeable adverse shock to the euro area economy. If oil prices were to remain at current levels, or even increase further, they would dampen the strength of the recovery both inside and outside the euro area," he said.

Mr Trichet blamed the rise in oil price for a rise in inflation, which he predicted would remain well above the ECB's target of 2 per cent for the coming months. He urged continued wage restraint and called on governments to resist increasing taxes.

"Under certain conditions, a smoother absorption of the oil price shock can be ensured: in particular, second-round effects in wage and price-setting must continue to be avoided, and fiscal authorities should refrain from taking measures which would prolong the necessary adjustment process," he said.

Mr Trichet restated the ECB's support for improvements in the implementation of the Stability and Growth Pact but warned against any change to actual budget rules.

"The Governing Council warns against changes to the Pact and, in particular, the excessive deficit procedure," he said.