Frankfurt - The European Central Bank (ECB) is expected to keep rates on hold Thursday despite signs that inflationary pressures are easing and fears are growing that large parts of Europe's economy are edging towards recession.

The Frankfurt-based ECB raised its benchmark refinancing rate by 25 basis points to 4.25 per cent in July to ward off the threat posed by resurgent inflation.

Belgrade  - The Serbian parliament on Wednesday overcame opposition to open a debate on a crucial pre-membership treaty with the European Union and several other major issues, including Kosovo.

Legislators were discussing ratification of the Stabilization and Association Agreement Serbia signed with EU. The treaty is a major step towards membership, but needs to be approved by all 27 member- states.

Brussels  - The European Union should reward Serbia for the capture of war-crimes indictee Radovan Karadzic by implementing a deal on trade liberalization, the EU's top official said Wednesday during a visit of Serbian President Boris Tadic to Brussels.

And European Commission President Jose Manuel Barroso said that he believed Serbia could become a candidate for EU membership as early as in 2009 if it continues to bring in key reforms.

Describing the July capture of Karadzic as a "milestone" and a "historic moment," Barroso said "I think it should be acknowledged by implementing the trade-related parts" of a broader political deal which the EU and Serbia signed in the spring.

Berlin - European retail sales fell more than expected in July, according to data released on Wednesday, amid growing uncertainty about the prospects for Europe's economy.

Month-on-month retail sales in July fell by 0.4 per cent in the 15-member eurozone and dropped by 2.8 per cent on a yearly basis. However, analysts had expected retail sales in the eurozone to fall by a modest 0.2 per cent month on month and by 2.1 per cent year on year in July.

The fall in July followed a sharp drop in June with retail sales sliding 0.9 per cent month on month and 3.2 per cent year on year.

Brussels - Luxembourg Prime Minister Jean-Claude Juncker would agree to remain as head of the so-called Eurogroup when his second and theoretically final term of office runs out at the end of the year, he told a Luxembourg paper Wednesday.

"If all 15 finance ministers unanimously want to prolong my mandate, I won't be able to say no," Juncker told the Luxemburger Wort paper.

Juncker, who is also his country's finance minister, was elected to head the informal group of finance ministers from the countries which use the euro in 2004.

Warsaw  - Polish President Lech Kaczynski met with his Portuguese counterpart on Tuesday to discuss Georgia, Ukraine and the European Union's Lisbon Treaty.

Kaczynski said he was optimistic, along with Anibal Cavaco Silva, about the Lisbon Treaty's future, but stressed that Ireland must solve "its problem" on its own. Kaczynski added that his signature wasn't hindering the treaty's ratification, but it's the Irish no vote in a June referendum that's a hindrance.

Kaczynski also reaffirmed he was happy with the conclusions reached at Monday's EU summit on Georgia.

"I think either Nicolas Sarkozy's success in Moscow awaits us," Kaczynski said, "or the necessity to act further."