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A rise in eurozone interest rates next week would damage Spain's recovery and hurt many small businesses and homeowners who are struggling to repay loans, according to Andreu Mas-Colell, the Catalonian regional government's economy minister. The impact of a rate rise would add to a series of shocks that have knocked a hole in the country's annual income and restricted its ability to recover from the financial crisis, he said.

The European Central Bank is considered to be close to pushing up eurozone interest rates from the current 1% following a sharp jump in inflation. ECB boss Jean-Claude Trichet has given strong hints that he has no option but to support higher interest rates to reduce the pressure on prices at the forthcoming meeting on 7 April. Mas-Colell, an internationally recognised economist who was recruited last year by Catalonia's new centre-right administration, said he had warned some time ago that a two-speed recovery in Europe would leave countries such as Spain facing higher interest rates before their recovery was entrenched. "I said two years ago that the disaster ahead would be for the rest of Europe to recover before us and for there to be a rise in interest rates," he said. Mas-Colell's argument, like those of opposition politicians in the UK, is that moves to reform the public finances and overhaul banking sector rules are going too fast.

Spain is under pressure from international investors to show how it will grow over the next few years to escape the threat of bankruptcy.

With Portugal considered to be only weeks away from seeking an bailout from fellow members of the European Union, there is mounting concern that Spain will struggle to meet EU demands for cuts in public spending while at the same time expanding economic growth. Catalonia has traditionally been regarded as an engine of growth for the Spanish economy, but like Spain's other 17 regions it has struggled to make headway in the aftermath of the global banking crisis. Mas-Colell, who spent several years in the US as a professor at Berkeley and Harvard, said the Basel banking reforms, which insist that banks hold more capital, had prevented Spain's good banks from making loans to small and medium-sized companies. Coupled with a reduction in public spending and a collapse in private consumption, he said, a rise in interest rates would be a negative step.

"For us it would be better if the eurozone's monetary and fiscal policies were more like America and Europe was not so dominated by demands for tighter monetary policy, fiscal austerity and financial reform," he said. Mas-Colell, who was recruited from a position in Brussels where he oversaw EU-funded research and development, argued that when the government is spending 3% of GDP on unemployment benefit and cutting 6% of GDP under EU-inspired austerity measures, the "best thing would be to put people to work". But a rise in interest rates will raise the cost of credit and hinder the ability of companies to generate jobs.