(Adds comments from Eurogroup chair Juncker)
By Leika Kihara and Marcin Grajewski
TOKYO/BRUSSELS, Jan 16 (Reuters) - European Central Bank President Jean-Claude Trichet on Friday reiterated there was still room for further interest rate cuts but said the bank was not thinking about adopting a zero rate policy.
His comments came as Europe's top business group BusinessEurope warned that companies were being choked by a lack of financing and urged the central bank to do more to revive the region's paralysed economy.
The ECB cut rates by another half a percentage point to 2.0 percent on Thursday, its fourth cut in as many months and taking credit costs to the lowest in the euro zone's 10-year history. [ID:nLF501185]
"To the question 'is 2 percent the lowest level that you will attain', I say no... If you ask me the question 'if you go to zero', I would say no," Trichet told Japanese public television NHK in an interview.
BusinessEurope, which represents 20 million European companies, said the ECB needed to keep cutting rates and do more to restore the flow of financing to companies, perhaps by buying debt from companies to spare up cash and help fire the economy.
"We are in a very deep and unexpected crisis... In 2009 we are going to have really tough times," BusinessEurope President Ernest-Antoine told a news conference with the group's chief economist, Marc Stocker, saying that companies had seen "complete economic paralysis," since September.
In a speech in Madrid, ECB Executive Board member Jose Manuel Gonzalez-Paramo said money market tensions were still hampering the flow of funds around the world.
"Other important segments of the global financial system, such as the markets for equities, bonds and commodities, have also entered a period of considerable turbulence and stress," he said.
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A Reuters poll [ECB/INT] showed 61 of 64 economists forecast another 50 basis points in March after Trichet on Thursday all but ruled out a cut in February, saying the meeting in three weeks was "not an important rendezvous for policy making".
Rates are now expected to bottom later this year at 1 percent, according to the poll of analysts.
Eurogroup Chairman Jean-Claude Juncker supported the view that rates in the euro zone should not be reduced to zero and said the ECB's move this month was appropriate.
"I have appreciated Mr.Trichet's comments on Japanese TV that it is not the intention of the ECB to take the rate level down to zero," Juncker told reporters.
"I think this step taken by the ECB was a necessary step because it is combined with the perspectives for February, when according to Mr Trichet nothing will happen, and for March when another rate step could follow," he said.
"Economic perspectives are getting gloomier, the data we receive is worse and worse. Recession tendencies are firming and therefore I think the rate cut was appropriate," Juncker added.
Euro zone rates are still much higher than the current rates of central banks in the United States, Japan and Switzerland which have all cut their policy rates close to zero, while the Bank of England is also seen heading that way.
"We would be very, very keen to avoid to be put in a situation which for us would not be appropriate, namely a liquidity trap." Trichet said, defining that as the point when rates were "very, very low".
"Near-term, the ECB's Governing Council seems poised to pause at the upcoming rate setting meeting. Part of the reasoning is that the ECB aims to avoid being trapped by nominal interest rates," said Dresdner Kleinwort analyst Rainer Guntermann.
"(That) does certainly not imply an end to the ECB's easing cycle...Whether the next move will be 50 basis points again or a smaller 25 basis points will ultimately be determined by the upcoming data, even though some individual comments from ECB Council members could produce some noise," he said.
Gonzalez-Paramo added that the ECB must also keep up its other efforts to help repair the financial system.
"As long as money markets remain dysfunctional, it is crucial for the Eurosystem to continue to provide as much liquidity as needed in order to ease tensions," he said.
(Additional reporting by Krista Hughes in Frankfurt, writing by Marc Jones; Editing by Patrick Graham)