Interest rates in Europe have been kept at 3.25%, amid concerns that the region's economic recovery was too fragile to risk a tighter regime.

The European Central Bank made the decision after its regular monthly meeting, in Luxembourg rather than its usual base in Frankfurt.

While the bank did not detail the reasons behind its decision to keep rates on hold for an ninth successive month, observers believe the recent surge in the value of the euro was partly responsible.

The currency's rise means import prices are falling, helping to keep a lid on inflation, as ECB president Wim Duisenberg told the European Parliament earlier this week. The currency's aappreciation, he said, "will contribute to the easing of inflationary pressures".

The jitters sweeping through global stock markets after a stream of corporate scandals in the US may also have weighed on the bank's thinking, sparking concerns about the solidity of economic recovery.

Stronger euro

As late as last month, economists were widely predicting a rise in European interest rates, perhaps as early as this month.

But in the event, even a surprise surge in German industrial orders - up 3.1% in May, four times the rise that was expected - could not outdo the concerns about the global economy and particularly the euro's place in it.

The currency has strengthened by 10% against the dollar in just two months, approaching parity after languishing well below it for the best part of three years.

Shortly after today's decision was announced, one euro bought 97.7 US cents, barely changed from the level immediately before the ECB made its announcement.

A higher euro could threaten recovery by making exports more expensive.

Tightrope

The ECB may now face a rather delicate balancing act.

It faced criticism last year for failing to move as quickly as the US Federal Reserve and the Bank of England in cutting rates to soak up the effects of the global downturn and keep the world economy ticking over.

Economists are practically united in believing that a rate rise will have to come before the end of this year, but the timing will be extremely tricky.

Too late, and inflation - still above the ECB's 2% target in many Eurozone countries - could take off.

Too early, however, and the ECB risks choking off a recovery before it really gets going.