The European Central Bank left interest rates unchanged at a record low of one percent on Wednesday.
Recent grim economic indicators and renewed concerns about the public finances in Spain have fuelled worries that the eurozone is in a mild recession and that the sovereign debt crisis may flare up again.
ECB President Mario Draghi said: “Downside risks to the economic outlook prevail, they relate in particular to a renewed intensification of tension in euro area debt markets, and their potential spillover to the euro area real economy.”
The ECB wants time for its support measures to take full effect and boost the region’s fragile economic recovery.
Sagging orders hit businesses in March, however a new business survey released on Wednesday showed companies more confident that better times lie ahead.
Draghi dismissed a German-led push for the bank to start planning a retreat from emergency crisis-fighting, but stressed it was keeping a close eye on inflation.
The ECB has pumped over one trillion euros into the financial system with the twin three year funding operations, or LTROs, to head off a credit crunch that late last year risked exacerbating the euro zone crisis and jeopardising the currency project.
On the push to begin preparing an exit from the ECB’s crisis mode, Draghi said: “Given the present conditions of output and unemployment, which is at historical high, any exit strategy talking for the time being is premature.”
He added bluntly: “I think the president of the ECB is the one who has the last word on this.”