Trying to set interest rates for a region of 15 separate countries is not an easy task. In recent months, the European Central Bank's (ECB) challenge has been all the greater as a split emerged in the way Eurozone countries were coping with the economic downturn.

While the German and French economies withstood the onslaught of the credit crunch, the Spanish and Italian economies suffered more severely - the housing market in Spain has gone into freefall. This has resulted in a suspected spat among members of the ECB. Central European countries are in favour of a rate rise next month to curb inflation, which has risen to a record 3.7 per cent, but Spain and Italy feel it could deal a hammer blow to their already faltering economies.

But there are signs that the Eurozone countries could start to pull in the same direction. Figures released this week point to more challenging conditions in Germany and France. German consumer confidence has fallen to a 30-month low, while French consumer spending has faltered. Spending on manufactured goods rose by 2 per cent in May, but this came after two monthly falls in March and April.

In a letter to the French president, Christian Noyer, the governor of the Bank of France, who is also a member of the monetary policy council of the ECB, said there was a possibility that the financial crisis might slow down growth in “real economies” beyond the sectors of finance. Mr Noyer said that in the second half of last year, the European economy had entered “a phase of great uncertainty which weighs on the outlook for growth."

This warning over economic growth chimed with Jean Claude Trichet's comments this morning, which ruled out a series of rate increases. Mr Trichet, who came under fire from Spain for making heavy hints about a rate rise in July before the rate meeting had even taken place, said: “I did not say that we would envisage a series of increases." But he repeated that a small increase in the ECB interest rates was “possible” next Thursday.

Perhaps more interesting than the "will they, won't they" question about July's rate decision will be the tone of the accompanying explanation. This will give a good indication whether the members of the ECB are still split over where rates should go, or whether the pain now being experienced in Germany and France has engendered a rapprochment.

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