The European Central Bank today announced it would keep interest rates at a record low as the ongoing Greek fiscal crisis complicates its withdrawal of emergency stimulus measures.

The Frankfurt-based ECB kept its benchmark interest rate at 1%. President Jean-Claude Trichet has already announced changes to ECB collateral rules to help Greece as it struggles to finance its debts.

The ECB’s 22-member Governing Council is gradually withdrawing the measures it took to tackle Europe’s worst recession since World War II, including measures to provide banks with unlimited cash. At the same time, concern that Greece’s crisis could spread to other countries in the 16-nation Euro Zone is undermining confidence in the currency. The single currency continued to fall against the US Dollar for the fourth day today, European stocks also dropped and Greek bonds slumped.

Last month EU leaders rallied round a proposal to help Greece with a combination of International Monetary Fund assistance and bilateral loans at market interest rates, while expressing confidence that the debt-laden nation wouldn’t need outside help to fix its problems.

Trichet initially opposed IMF involvement in any rescue. Increasing speculation that the plan is now going to unravel has weakened the Euro in the forex market this week. As the Greek crisis persists, economists have pushed back expectations for ECB rate increases and now don’t expect a move until the first quarter of 2011.

“Greece is keeping the ECB in wait-and-see mode,” said Carsten Brzeski, an economist in Brussels. “The indirect impact from the Greek case is that we will see more fiscal tightening from several Euro-Zone members earlier than the ECB thought, which has a deflationary impact and is slowing down the recovery.”

In other rate announcements, the Bank of England kept its benchmark interest rate unchanged at a record low of 0.5% earlier today and held its bond-purchase plan at 200 billion pounds. In the U.S., the Federal Reserve has maintained its pledge to keep rates at a record low for an “extended period.”

By contrast, the Reserve Bank of Australia this week raised its key rate for a fifth time in six meetings to 4.25%. The Australian Dollar has advanced to an 11 week high against the US Dollar this week closing trading yesterday at USD 0.9771.