Arab Today, arab today ecb holds rates\confident\ on greek debt deal
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ECB holds rates:\'confident\' on Greek debt deal

Arab Today, arab today

Arab Today, arab today ECB holds rates:\'confident\' on Greek debt deal

Frankfurt - AFP

The European Central Bank held key rates steady on Thursday and expressed confidence that a solution can be found to Greece\'s debt woes which are at the root of the eurozone\'s debt crisis. The ECB\'s policy-setting governing council voted to leave the rate for its main refinancing operations unchanged at 1.0 percent at its regular monthly meeting here, as widely expected. Earlier in London, the Bank of England also held its rates steady at a record low of 0.5 percent but said it would inject another £50 billion (60 billion euros, $80 billion) into Britain\'s struggling economy. No rate changes had been expected from the ECB this week following two earlier cuts and the unprecedented amounts of liquidity pumped into the banking system recently to avert a credit crunch. Analysts and central bank watchers were focusing instead on what bank president Mario Draghi would say about Greece\'s crippling debt situation, with crunch eurozone talks scheduled later on Thursday. In Athens, coalition leaders said they had reached a \"general agreement\" on additional austerity measures demanded by the European Union and the International Monetary Fund. Draghi told a news conference that he was \"confident\" a deal would be reached but added that the ECB has not drawn up a back-up plan. \"I will never have a plan B. To have a plan B is to admit defeat already. I am confident that all the pieces will fall in the proper places,\" Draghi said. As part of a wider restructuring of Greece\'s debt, private creditors are being asked to write off about half of the 200 billion euros\' ($265 billion) worth of government bonds they hold to help cut the country\'s total burden to a sustainable level. The ECB, too, has come under pressure to take losses on the Greek government bonds it holds as the restructuring by private creditors is unlikely by itself to bring down Greece\'s debt to the target of 120 percent of GDP in 2020 from 160 percent at present. But Draghi said that would be tantamount to \"monetary financing\", a policy whereby a government in effect prints money to boost liquidity. The ECB was \"not a negotiating party\" in the talks between Greece and its private creditors, the ECB chief noted. And \"it\'s not our intention to violate the prohibition on monetary financing ... All this talk about the ECB sharing the losses (is) unfounded,\" he said. Nevertheless, Draghi did appear to leave the door open to using parts of the profits the ECB made on its Greek bond holdings. \"If the ECB distributes part of its profits to member countries ... that\'s not monetary financing,\" he said. Draghi has been in office for 100 days now and since he took over, the central bank has brought eurozone borrowing costs back down to their previous historical low of 1.0 percent. It has also offered banks in the region an unlimited pool of liquidity by loosening collateral rules, cutting the minimum reserve ratio and launching new three-year loans at super-cheap rates. Draghi insisted the ECB measures were working. \"Stress in financial markets has diminished in response to our monetary policy measures,\" he said. A second offering of ultra-cheap liquidity is scheduled for the end of February and Draghi said demand then was likely to be at least as high as the first offer in December, where hundreds of banks queued up to borrow 489 billion euros. Analysts said that while the ECB was clearly prepared to continue to play firefighter in the debt crisis, Draghi insisted that the onus was on governments to restore confidence in eurozone finances. \"Overall, the message from the ECB remains pretty clear. While it remains happy to fulfil its role as lender of last resort to the eurozone\'s banks, the region\'s governments should sort their fiscal problems out for themselves,\" said Jonathan Loynes, chief European economist at Capital Economics. Analysts said that even though borrowing costs were at historic lows, the ECB could cut rates still further if the situation deteriorated. \"In its role as the fire brigade for the eurozone economy, the ECB is leaning back, keeping its powder dry and will wait-and-see,\" said Carsten Brzeski, senior economist at ING Belgium. \"Rate cuts, however, are not yet off the table but are highly conditional on growth.\" Howard Archer at IHS Global Insight agreed. While the ECB was unlikely to cut interest rates again in the immediate future, further moves \"remain a possibility,\" he said.

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