European Central Bank President Mario Draghi has refused to commit to more support for banks or governments as the eurozone debt crisis enters a new phase.
Addressing the European Parliament’s Economic and Monetary Affairs Committee Draghi said the ECB is not considering rolling back its crisis-fighting measures but now governments and banks have to do more: “All our standard measures are temporary in nature. Moreover, liquidity support cannot substitute for capital or for sound fiscal and structural policies. They bring about sustainable growth and stability in the European economy.”
Draghi expressed disappointment the liquidity the ECB has injected into the banking system in recent months has not fed through into the real economy more quickly with not enough being lent on to businesses and individuals.
He said now that the banks have been given some breathing space with those low interest long-term loans lenders also have to strengthen their finances further.
Draghi called on governments to stick with fiscal austerity drives which in some cases are driving countries deep into recession. “We are just in the middle of the river that we are crossing,” he said. “The only answer is to persevere.”
The ECB chief said any “exit strategy” from the central bank’s emergency measures was premature given weak economic conditions.
His comments came as financial markets fear the ECB will have to ride to the rescue again with Spain under intense pressure, the Dutch government having collapsed over budget plans and latest data showing the eurozone is being driven back into recession.