Confidence in the European economy unexpectedly rose to a six-year high and unemployment fell to a record low, giving the European Central Bank scope to raise interest rates further in the 13-nation euro region. An index of sentiment among executives and consumers in the euro area increased to 111.2 in March, the highest since early 2001, from 109.7 in February, the European Commission in Brussels said on Friday.

Economists expected the index to fall to 109.5, according to a Bloomberg News survey of economists.

The jobless rate fell to 7.3% in February and inflation accelerated to 1.9% in March, separate reports showed. The euro regions economy, which expanded at the fastest pace since the start of the decade in 2006, may gather momentum later this year as companies increase investment spending and hiring, bolstering consumer confidence.

ECB President Jean- Claude Trichet said yesterday borrowing costs are still on the accommodative side after seven rate increases since late 2005.

Bloomberg