The Bank of England and the European Central Bank left interest rates unchanged at their regular policy-making meetings, reflecting continued divergence between the British and euro-zone economies.

The proposition made by German Council of Economic Experts provides detailed blue print to mutualize the current debts of all euro-zone economies above 60% of their GDP.

Italy and Spain, which are considered the two big euro-zone economies most vulnerable to an escalation of debt problems, both were downgraded two notches, Italy to BBB+ and Spain to A.

Germany, which accounts for one-third of the euro-zone economy, reported a big jump in industrial production on Thursday and unemployment has dropped for eight consecutive months.

One common criticism of the euro-zone economies is that they have not yet deregulated their labor markets and reduced taxes.

Mr. Trichet pointedly refused to endorse this view but by saying that the euro-zone economy was "close to its trend potential rate," the European bank raised the possibility that a humming European economy would increase inflation as companies pass on higher prices to eager buyers.

"Ireland's third-quarter GDP figures rather spoil its emerging image as a 'poster boy' for other debt-laden peripheral euro-zone economies," said Jonathan Loynes, chief European economist at the Capital Economics consultancy.

With its benchmark rate at 2 percent, the European Central Bank said it still expected a modest upturn in the euro-zone economy, which has been shrinking.

The commission said it expected Germany, the largest of the 12 euro-zone economies, to slow the most, to 2.2 percent this year from about 3 percent in 2000.

British unemployment is at record lows while it is high in many of the leading euro-zone economies.