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Draghi holds rates, offers caution

Wednesday, April 04, 2012 - 01:50

April 4 - The European Central Bank holds interest rates at a record low 1 percent, resisting German pressure to flag a exit from crisis-fighting mode in the euro zone, and warns that euro zone stability is still far from certain. Joel Flynn reports.

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European Central Bank President Mario Draghi had clearly left his rose-tinted spectacles at home on Wednesday as he reminded markets euro zone stability was still far from certain. Speaking at the Bank's monthly rates announcement, Draghi warned that measures taken to stabilise the euro zone could still falter. SOUNDBITE: European Central Bank President, Mario Draghi, saying (English): "The remaining tensions in the Euro area sovereign debt markets and their impact on credit conditions, as well as the process of balance sheet adjustment in the financial and non-financial sectors and high unemployment in parts of the euro area, are expected to continue to dampen the underlying growth momentum." The ECB held interest rates at the historic low of 1 percent, warning that inflation risks remained as well. Draghi mentioned that short term loans of a trillion euros to european banks would only be temporary. The loans are a measure that Germany has pushed to discuss exiting because of inflationary pressures. Fears over loosening ECB policy still largely hinge around Spain though, and concerns the country may need a bailout. Spain's economy minister Luis de Guindos told Reuters belief the country could not control its finances was the largest risk the economy faced. SOUNDBITE: Spanish Economy Minister, Luis De Guindos, saying (Spanish): "The government is absolutely aware of the environment, that there is an atmosphere of nervousness, that in addition it is made worse by the perception of a slow-down in Europe." Despite ongoing concerns however, Portugal managed to successfully sell a billion euros of government debt on Wednesday. And weak though the European recovery may still be, some say it could now be time for Draghi to put his rose-tinted spectacles back on. Joel Flynn, Reuters

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Draghi holds rates, offers caution

Wednesday, April 04, 2012 - 01:50