Draghi sees Irish return to markets
European Central Bank president Mario Draghi said today Ireland is well on its way back into private debt markets.
Speaking after the ECB left its benchmark rate at 1 per cent, Mr Draghi appeared to agree with Germany’s statement two days ago that any new banking deal for Ireland would send the wrong signal.
Mr Draghi said the implicit message to the Government right now was continue on its present path.
Asked whether the outcome of the fiscal treaty referendum would strengthen the Government’s campaign to ease the burden of the bank rescue, Mr Draghi said he was glad to have been proven right in his prediction that the treaty would pass.
“I do not think there was any ground or any statement of a quid pro quo for this. I think that decisions should be taken for what they are,” he told reporters.
Mr Draghi said officials are ready to add more stimulus to the euro region's economy if necessary, while damping expectations that another round of three-year funding for banks is imminent.
"We monitor all developments closely and we stand ready to act" as the economy faces "increased downside risks," Mr Draghi told reporters in Frankfurt.
"A few" governing council members asked for a rate cut today, he said. The ECB is under pressure to lower rates and introduce more liquidity support for banks as governments struggle to fix a crisis that's engulfing Spain and could force Greece out of the euro.
While Mr Draghi said that the ECB will extend its offerings of three-month unlimited cash into next year, he indicated that longer-term financing will have to wait. "I don't think it would be right for the ECB to fill other institutions' lack of action," said Mr Draghi when asked about the prospect of another offering of three-year funds for banks.
"He's delineating the role of the ECB from that of governments, as he seeks to get leaders to agree on a roadmap" to shore up the euro, said Julian Callow, chief European economist at Barclays in London.
The euro fell along with Spanish bonds as Mr Draghi spoke. The single currency dropped as much as 0.3 per cent to $1.2441 before trading at $1.2495. The yield on Spain's 10-year government bond climbed as much as 6 basis points to 6.2921 per cent before slipping to 6.2428 per cent.
With European governments struggling to fix a crisis that's engulfing Spain and could force Greece out of the euro, economists say the ECB may soon be forced to lower rates and introduce more liquidity support for banks.
The Group of Seven nations yesterday agreed to coordinate their response to Europe's turmoil, which has tipped at least eight of the 17 euro-area economies into recession and damped European demand for foreign goods.
ECB officials convened a day earlier than usual due to a public holiday in some German states tomorrow.
G7 finance ministers and central bankers discussed "progress toward financial and fiscal union in Europe" on a conference call yesterday that focused on Spain and Greece, officials said.
Additional reporting: Bloomberg