The European Central Bank (ECB) has said last week's interest rate rise was aimed at ensuring there would be no obstacles to Europe's recovery and its president, Mr Wim Duisenberg, said the weak euro helped trigger the decision.

In its annual report, the ECB cited the fact that the economic upturn in Europe was starting to gain pace and fears that a pick-up in inflation could feed into high pay rises as key motivations for the decision.

The ECB raised the cost of borrowing by 25 basis points last week, lifting the main refinancing rate to 3.25 percent and raising two other key rates by the same margin.