Draghi dampens hopes for massive ECB action to end crisis

8th December 2011, Comments 0 comments

The European Central Bank dampened hopes Thursday for large-scale action on its part to stem the debt crisis, saying governments must to "do their utmost" to restore confidence in the euro.

"Governments must do their utmost" in terms of pushing through the necessary financial and structural reforms, ECB chief Mario Draghi told a news conference after cutting interest rates in the face of a looming economic downturn in the single currency area.

"The ultimate decisions are in the hands of leaders," Draghi said.

Looking ahead to a EU summit in Brussels starting later on Thursday on ways to find a way out of the debilitating sovereign debt crisis, Draghi said "what's happening is a redesign of the fiscal agreement in a way that would rebuild confidence.

"We have our own views, but the ultimate decisions are in the hands of leaders. They bear responsibility for the decision," he said.

In addition to cutting its rates for the second time in two months, the ECB said it would extend its liquidity-providing operations and accept a wider range of collateral for loans in a bid to help support cash-strapped eurozone banks.

Draghi said refinancing operations would be extended to include operations with a maturity of up to three years. And the ECB would also "increase collateral availability by reducing the rating threshold for certain asset-backed securities (ABS)."

The ECB chief expressed surprise at how some recent comments by him had been interpreted in such a way as to suggest the guardian of the euro was considering ways of scaling up its anti-crisis role.

He stressed again that the bank's controversial programme of buying up the sovereign bonds of debt-wracked countries was "limited" and "temporary".

The EU treaties forbade "a monetary financing of states," he argued, again rejecting intense pressure for the ECB to solve the crisis by simply printing enough money to buy up a large part of the mountain of debt that many eurozone countries have amassed.

© 2011 AFP

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