The 12-nation Eurozone is keeping interest rates steady at 3.25%, despite mounting evidence that the continent's economy is having trouble growing.

The decision, announced on Thursday by the European Central Bank, means that borrowing costs have now been frozen for a full year, despite a massive slowdown in Europe's economy.

It underlines the European Central Bank's view, made forcibly by its president Wim Duisenberg, that uncertainty and the slow pace of structural reform is keeping the Eurozone in the doldrums, rather than the cost of money.

Whatever the cause, the latest figures support the view that the region is suffering. European Union data also out on Thursday downgraded growth prospects for the Eurozone to 0.2-0.5% in both the third and fourth quarters, the third downgrade this year.

Trouble in store

Despite Mr Duisenberg's certainty about the causes of Europe's woes, the limp growth in Europe means cuts are probably on the agenda in the near future, economists said.

"Our suspicion is that even after these downgrades, the third quarter growth forecast is too optimistic," said Gwyn Hacche from HSBC.

"Unless the indicators start to pick up, there is a reasonable chance that the ECB will cut interest rates by the end of the year."

The sense of troubles still to come in Europe has been reinforced by recent evidence that consumer spending - the engine that has kept much of the world economy going for the past year - is tailing off.

On top of that, news that Italian carmaker Fiat is planning to ditch a fifth of its workforce have cast a pall.