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Reply #21: Central Bank Chief Hints at Stepping Up Euro Support [View All]

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Demeter Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-02-11 07:03 AM
Response to Reply #5
21. Central Bank Chief Hints at Stepping Up Euro Support
http://www.nytimes.com/2011/12/02/business/global/dragh...

Mario Draghi, the president of the European Central Bank, laid the groundwork for a more aggressive response to the debt crisis Thursday, suggesting that the bank could increase its support for the European economy if political leaders took more radical steps to enforce spending discipline among members...In the run-up to a meeting of European leaders late next week, Mr. Draghis remarks seemed to be part of a larger effort by the bank and the regions biggest economic powers Germany and France to lay the foundation for a broader rescue without seeming to compromise their principles. Later in the day Thursday, the French president, Nicolas Sarkozy acknowledging the regions debt crisis announced that he and the German chancellor, Angela Merkel, would meet in Paris on Monday to make French-German propositions to guarantee the future of Europe.

Last weekend, Germany and France began floating a plan to hold member nations of the euro currency union more financially accountable to their fellow members by giving European Union officials the power to vet and approve their national budgets. Euro zone agreement to such a proposal is seen as a possible precondition to increased financing by the central bank, to which Germany and France are the biggest contributors.

Mr. Draghi, in the manner of central bankers, made no explicit promises on Thursday. And the quid pro quo he offered governments was indirect. But his remarks illuminated how the bank might answer increasingly desperate calls for the bank to escalate its intervention in bond markets without violating its own mandate or alienating Germany, where opposition to a central bank bailout of Greece or Italy continues to run deep. Speaking to the European Parliament in Brussels, Mr. Draghi stopped well short of offering a European version of the sort of large securities purchases that the United States Federal Reserve has used to try stimulating the American economy. But he seemed to be saying that the bank would use its virtually unlimited resources to keep financial markets at bay, if government leaders in the euro region agreed to do their part by addressing the structural flaws that had allowed the debt problems of Greece to mutate into a threat to the global economy...

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