Draghi keeps door open to further ECB rate cuts

Mon Jul 9, 2012 1:15pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Robin Emmott

BRUSSELS (Reuters) - European Central Bank President Mario Draghi kept the door open on Monday to further interest rate cuts, saying any decision on further action would depend on economic data.

He also urged countries not to let up on efforts to balance their budgets even though savings measures can cause "social tensions", and said that governments should be involved in any bank resolution where taxpayer money is involved.

The ECB cut its key policy rate to a record low 0.75 percent last week to shore up the euro zone economy which is on the brink of recession, with even powerhouse Germany showing some signs of weakness.

"We have to look at what the situation is, look at the data and the developments and then we'll make up our minds in the Governing Council about what next actions we'll do," Draghi told the European Parliament when asked whether the ECB could continue reducing rates.

Even at 0.75 percent, the ECB's main interest rate is higher than that of any of the other four leading central banks.

ECB Executive Board member Peter Praet said in Lisbon that while very low rates create problems if they are in place for a long period of time, there was no "taboo" on interest rates, implying that the bank had not ruled out additional rate cuts.

Praet said the current crisis was more profound than that in 2008, when the shock collapse of Lehman Brothers prompted credit markets to seize up globally.

"The Lehman bankruptcy in 2008 revealed the fragility of the financial system ... At the time it was mostly the securitization industry that was criticized, but now it (the crisis) is much more profound, it is not about the distribution model anymore, it is much more fundamental," Praet told a conference on Monday.   Continued...

 
European Central Bank (ECB) President Mario Draghi (C) arrives to testify before the European Parliament's Economic and Monetary Affairs Committee in Brussels July 9, 2012. REUTERS/Francois Lenoir