European Central Bank Limits Eurozone Intervention
Italian public sector workers protest against austerity measures.
As they staged a strike, Europe’s finance ministers held a conference call on the eurozone debt crisis.
They pledged to continue a drive for tighter fiscal rules and enhance the IMF’s crisis-fighting abilities.
While they need to convince investors they can overcome their sovereign debt crisis, President of the European Central Bank, Mario Draghi, made it clear the euro was here to stay.
During a speech at the European Parliament he said it was non negotiable.
“I have no doubt whatsoever about the strength of the euro, about its permanence, about its irreversibility. Let’s not forget, this was a key word at the time of the Maastricht treaty. The one currency is irreversible.”
The European Central Bank said it would protect the eurozone’s banks, partly by offering them three-year loans, but it would not step up its bond buying program.
Draghi added that the bank would not be printing money and would make sure it kept to its own agreed remit.
“The treaty specifies very closely what our remit is, namely ensure price stability in the medium term. The treaty also forbids monetary financing and, and as you have seen, we want to act within the treaty. I think that to take any other behaviour that would somehow breach the treaty would also affect, negatively affect, the credibility of our institution.”
He admitted that austerity measures were hurting.
“I have no doubt that austerity implies contraction, short-term contraction. And there is no point in disputing about this. What we want is that this contraction to be short term and we want to activate all the channels that would enable confidence to return to markets, spreads to go down, costs of credit to go down and ultimately for job-creation to take off.”
But he was confident that euro area economic activity would very gradually recover during the course of 2012 despite market tensions.