ECB resists calls for more crisis action

European Central Bank chief Mario Draghi stood firm on Friday against heavy pressure to come to the rescue of the eurozone, standing by the bank's independence and anti-inflation duty. Draghi, who took over at the ECB's helm on November 1, hit back by telling governments they had a duty to get their finances in order first and enact agreed measures to stabilise the crisis-wracked eurozone. Pressuring the ECB to act would undermine the bank's credibility, Draghi warned. At the same time, British Prime Minister David Cameron, speaking in Berlin, called for all eurozone institutions to defend the common currency. After talks with German Chancellor Angela Merkel, Cameron said: "As we agreed at the G20, all the institutions of the eurozone have to stand behind and back the currency and do what's necessary to defend it -- that is what needs to happen," he said. Cameron has urged the ECB to be used as a "big bazooka" to defend the euro by buying up bonds on a major scale and becoming the lender of last resort to debt-mired countries. In the current environment, the "continuity, consistency and credibility" of the ECB and its monetary policy were essential, said Draghi. "Credibility implies that our monetary policy is successful in anchoring inflation expectations over the medium and longer term. "This is the major contribution we can make in support of sustainable growth, employment creation and financial stability," Draghi said in a speech to the European Banking Congress here. "And we are making this contribution in full independence." There is growing pressure from politicians and the markets for the ECB to ramp up hugely its purchases of bonds issued by governments in trouble so as to relieve the upward pressure on their borrowing rates. At the same time, such a move, by supporting the bonds would help protect the banks which have built up large holdings of such weak government bonds. Instead, it was up to the politicians to solve the debt crisis, Draghi insisted. "National economic policies are equally responsible for restoring and maintaining financial stability," he said. "Solid public finances and structural reforms -- which lay the basis for competitiveness, sustainable growth and job creation -- are two of the essential elements." A third essential element for financial stability was "a much more robust economic governance of the union going forward," he said, calling for "urgent implementation" of recent decisions taken by the European Council and the EU. Draghi complained that it was now 18 months since EU leaders agreed to set up the European Financial Stability Facility (EFSF) as a bailout fund for debt-stricken countries. It was also four months since EU leaders had finally decided to make the full EFSF guarantee amount of 440 billion euros available at times of need. "And we are four weeks after the summit that agreed on leveraging of the resources by a factor of up to four or five and that declared the EFSF would be fully operational," Draghi said. "Where is the implementation of these long-standing decisions? We should not be waiting any longer," Draghi said. Head of Germany's Bundesbank and ECB governing council member Jens Weidmann also believed that the onus lay with governments, saying it was "indispensible" that reforms were made to tackle "deficiencies in the institutional framework of monetary union and structural deficiencies in various member states. "The lack of success in containing the crisis does not justify overstretching the mandate of the central bank and making it responsible for solving the crisis," Weidmann said. "A clear commitment to (the ECB's price stability) mandate is an indispensable element of a prosperous future for the euro," he added. Like Draghi, Weidmann rejected calls for unlimited buying by the ECB of sovereign bonds of debt-wracked countries. "I am also convinced that the economic costs of any form of monetary financing of public debt and deficits outweigh its benefits so clearly that it will not help to stabilise the current situation in any sustainable way," he said. Italy's new prime minister, Mario Monti, also defended the bank's independence although his country would likely benefit most from more active bond buying by the ECB. Monti said the ECB's decisions are taken "in the framework of an European institution which I personally don't see any reason to change." The ECB is widely believed to have intervened to prop up Italy's bond market in August and more recently has been said to have helped out Spain as both countries have seen their borrowing costs spike dangerously higher.