The head of Europe's central bank has admitted that the introduction of euro notes and coins resulted in higher prices for some goods.

Wim Duisenberg, the president of the European Central Bank (ECB), was addressing the European Parliament.

"Some upward price adjustments might have occurred in connection with the cash changeover," Mr Duisenberg said.

But he insisted that other factors were mostly responsible for the rise in prices of vegetables and tobacco products at the beginning of the year.

Price and wage threat

Inflation in countries which are members of the euro rose from 2% in December to 2.7% in January.

Mr Duisenberg told European MPs that the euro's recent rise against other currencies was helping to contain inflation.

But he said the bank was keeping a close eye on the threat from rising prices and wage increases.

And he warned that temporary price rises for oil and food, for example, should not be used to justify pay increases greater than the rate of inflation.

Rates decision

Mr Duisenberg said that growth in the eurozone would recover to a rate of 2.0-2.5% by the end of this year.

But he warned some member countries about what he called worrying developments in their fiscal policies.

He did not name the countries involved, but both France and Portugal have recently admitted their budget deficits this year will exceed EU targets.

The ECB is meeting this week to discuss interest rates, and is expected to leave them on hold.