Belfast Telegraph

ECB president: fiscal union to solve debt crisis, not bank intervention

By Matthew Holehouse

Mario Draghi, the president of the European Central Bank, has signalled that the bank does not plan to prop up bond markets and urged governments to move towards fiscal union to resolve the debt crisis.

Mr Draghi told MEPs: "The ECB's monetary policy is constantly guided by the goal of maintaining price stability in the euro area over the medium term - and this applies to price stability in both directions."

"These comments do open up the chance for a rate cut," said Jeremy Stretch, head of currency strategy at CIBC World Markets.

The ECB unexpectedly cut its benchmark interest rate by a quarter point to 1.25% earlier this month and all but one of 26 economists in a Bloomberg News survey predicted another quarter-point reduction when policy makers meet on December 8.

Mr Draghi joins a chorus of voices in demanding Brussels takes control of national budgets in a bid to stop the euro spiralling apart.

Nicolas Sarkozy, the French president, is expected to today swing behind Berlin and present ideas for an EU treaty change in a speech in Toulon. It is likely to be met with fierce protest in the Republic ahead of domestic elections, but Sarkozy is determined to avoid a credit rating downgrade.

Philipp Roesler, Germany's economy minister, said yesterday it could take five years to fight the roots of the crisis.

He said he agreed with coalition partners Angela Merkel and the Christian Social Union party that Germany could not accept eurobonds - common debt issuance which would see indebted Mediterranean nations piggy-back on Germany's strong credit nations.