France's Sarkozy criticises ECB rate increase

PARIS, July 5 (Reuters) - French President Nicolas Sarkozy on Saturday criticised the European Central Bank's (ECB) decision to raise interest rates this week arguing it harmed European export companies. At a gathering of his ruling UMP party in Paris, Sarkozy asked if "it was reasonable to raise European rates to 4.25 (percent) while the Americans have rates at 2 percent."

The ECB raised interest rates on Thursday to their highest level in nearly seven years saying the move was needed to help get record euro zone inflation back under control.

The French president already spoke out against the ECB rate increase on Monday saying that it would not fix inflation as its major driver was the high price of oil.

Sarkozy on Saturday asked why "we have to suffer, on top of this, a monetary dumping (hinting at China's undervalued yuan) which brings down on their knees European companies that want to continue to export."

The ECB's main role is to keep inflation below 2 percent over the medium term but consumer prices are now rising at an annual rate of 4 percent, the fastest since the euro's launch. (Reporting by Veronique Tison, writing by Astrid Wendlandt, Editing by Peter Blackburn)