--ECB to keep providing liquidity when needed
--ECB head opens door to possible rate cut
--Draghi says will make details known on vision for Europe shortly
(Adds detail in paragraphs 1-4 and 9-10)
By Todd Buell and Margit Feher
The European Central Bank will continue its "crucial role" of
providing liquidity to sound banks against appropriate collateral, ECB
President Mario Draghi said Friday.
His comments suggest that the central bank may be standing ready to
answer international calls to ease monetary conditions in the
17-nation euro zone as risks to the financial system intensify.
He also said inflation expectations in the euro zone are well anchored
and that there are no inflationary threats in other euro-zone states.
"Inflation expectations remain well anchored and there is no inflation
risk in any euro-area country," he said.
Experts saw Mr. Draghi leaving the door open for policy easing, if the
euro zone makes progress on structural changes.
"In a nutshell, Draghi suggests that the ECB is ready to act, but the
move seems to be conditional to structural changes, as often repeated
since the start of the [euro-zone] debt crisis," wrote Newedge
Economist Annalisa Piazza in a research note.
Mr. Draghi said strengthening the growth potential of Europe's
economies "is crucial."
The ECB left its main interest rate on hold at a record low 1.0% last
week, but Mr. Draghi conceded that a few members of the governing
council wanted to cut rates, suggesting that lower rates may be on the
horizon.
Mr. Draghi's comments come as stability risks in the single currency
area increase and Greece holds repeat parliamentary elections June 17
in a vote widely viewed as a referendum on the country's future in the
euro zone. Greek banks borrowed 62.02 billion euros ($78.32 billion)
from the ECB in April, data showed June 12. The country is receiving
emergency international funding to keep its economy afloat, subject to
meeting harsh cost-cutting conditions.
Fears the euro-zone debt crisis may spread have pushed Spanish and
Italian borrowing costs to record highs.
Providing liquidity "is what we have done throughout the crisis,
faithful to our mandate of maintaining price stability over the medium
term- and this is what we will continue to do," Draghi said at the
annual "ECB and Its Watchers" conference here. The Eurosystem -- the
ECB and the 17 national central banks that use the single currency --
"will continue to supply liquidity to solvent banks where needed."
The Institute of International Finance has said Greece's emergency
bailout program targets should be eased and the country might need
between EUR20 billion and EUR30 billion more in financial aid. Greece
has already received two international bailouts over the last two
years.
The ECB president also made an implicit call for more democratic
involvement in European decision making. This comes as the president
is working with other top European leaders to map out a vision for the
future of Europe ahead of a meeting of European leaders at the end of
this month. He said details on this will be released soon.
"At some point, when supranational institutions and processes
continually gain influence, the need for greater political legitimacy
becomes more and more pressing," he said.
Write to Todd Buell at todd.buell@dowjones.com or to Margit Feher at
margit.feher@dowjones.com
(END) Dow Jones Newswires
June 15, 2012 06:12 ET (10:12 GMT)
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