EUROPE - The European Central Bank raised its key interest rates today, saying it did so in part to create stable conditions for pension reform amid population ageing.

Discussing the overall economic conditions for the euro-zone, ECB president Jean-Claude Trichet said: "Fiscal consolidation is likely to be most successful when coupled with comprehensive structural reforms. These are urgently needed to help to cushion the unfavourable economic effects of the projected demographic change in the euro area.

"The decline in the working age population will place further pressure on pension and health care systems, and may have wide-ranging economic consequences.

"In order to support the potential economic growth of the euro area, to foster macroeconomic flexibility and dynamism, and to safeguard the future standard of living of our citizens, labour and product market reforms are urgently needed.

"This will increase labour market participation and employment and strengthen innovation and the other forces driving productivity and economic growth. The ECB will play its part by continuing to maintain price stability over the medium term.

The bank raised rates by 25 basis points to 3.25%

"This decision reflects the upside risks to price stability over the medium term that we have identified through both our economic and monetary analyses," Trichet told a news conference.