Reuters - Video

Edition: US | UK | IN | CN | JP

Video

ECB hints at further euro zone action

Thursday, December 01, 2011 - 02:30

Dec. 1 - The new head of the European Central Bank Mario Draghi signaled it's ready to act more aggressively to fight Europe's debt crisis, just a day after the world's major central banks took emergency joint action. Joanna Partridge reports.

▲ Hide Transcript

View Transcript

There was some relief for traders on Thursday when Spain managed to sell 3.75 billion euros of its debt, just a day after central banks including the U.S. Federal Reserve and the European Central Bank took coordinated action to provide European banks with much-needed liquidity. Madrid's borrowing costs were over 5% - the highest since before the launch of the euro - but far below the 7% level that many consider unsustainble. France also saw good demand for its sale of long-term debt. The central banks' action appears to have brought some improvement to the markets - as Spain's borrowing costs have come down and France has moved out of the direct line of fire in the debt crisis, says Tobias Blattner from Daiwa Capital. SOUNDBITE: Tobias Blattner, European Economist at Daiwa Capital, saying (English): "Yesterday's action will only bring some kind of short-term relief, that might be carried on now to the next two or three weeks, driven by other positive news that might eventually come out, but it certainly does not solve any of the structural underlying problems of Europe's debt and banking crisis." The growing risks to Europe's economic outlook are a concern for new European Central Bank President Mario Draghi. He signalled in his first speech to the European Parliament the ECB is prepared to take stronger action to fight Europe's debt crisis, if political leaders agree at next week's summit to tighter budget controls. SOUNDBITE: Mario Draghi, European Central Bank President, saying (English): "A credible signal is needed to give ultimate assurance over the short term. What I believe our economic and monetary union needs is a new fiscal compact - a fundamental restatement of the fiscal rules together with the mutual fiscal commitments that euro area governments have made." As the euro zone looks for more fiscal integration, Bank of England Governor Mervyn King called on Britain's banks to carry on building up their capital to protect themselves. SOUNDBITE: Mervyn King, Bank of England Governor, saying (English): "Banks are interconnected across the world, so banks everywhere are being affected by what is happening in the euro area and if those problems are resolved I think funding costs will come down and there would be no reason why there should be a credit crunch. But it all depends, as you say, on what happens." And that's the big question. Economists say it's unlikely central banks will act again - meaning it's now up to European politicians once again to bring about more fiscal integration as they attempt to resolve the debt crisis for good. Joanna Partridge, Reuters

Press CTRL+C (Windows), CMD+C (Mac), or long-press the URL below on your mobile device to copy the code

ECB hints at further euro zone action

Thursday, December 01, 2011 - 02:30