Central banks prepare for turmoil after Greek vote

Fri Jun 15, 2012 1:52pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Eva Kuehnen and Sven Egenter

FRANKFURT/LONDON (Reuters) - Central banks from Tokyo to London checked their ammunition on Friday in preparation for any turmoil from Greece's election, with the European Central Bank hinting at an interest rate cut and Britain set to open its coffers.

Tensions were high about how to manage the euro zone's debt crisis - epitomized by Greece's bankruptcy and need for international aid - and a rare fight broke out between Germany and France, normally the glue that keeps the bloc together.

German Chancellor Angela Merkel criticized France's economic performance, effectively taking a swipe at Socialist President Francois Hollande who has called for more emphasis on economic growth and less on budget austerity.

The feeling of crisis was real. "We must do everything possible to prevent the euro zone from falling apart," Dutch Prime Minister Mark Rutte said on television.

ECB President Mario Draghi, one of many policymakers gearing up for trouble after Sunday's vote in Greece, said his bank was ready to step in and fund any viable euro zone bank that gets in trouble.

He painted a picture of a deteriorating euro zone economy with no inflation danger - conditions for monetary easing.

"There are serious downside risks here," Draghi told the annual ECB Watchers conference in Frankfurt, two days before the vote that could set Athens on a path out of the euro zone and stoke turmoil in financial markets.

"This risk has to do mostly with the heightened uncertainty."   Continued...

European Central Bank (ECB) President Mario Draghi (L) talks with Portugal's Finance Minister Vitor Gaspar as they arrive for a finance conference in Frankfurt June 15, 2012. REUTERS/Alex Domanski