ECB maintains historical low rates amid Greek fiscal crisis
0 
|
|
|
The euro sculpture is seen in front of the European Central Bank in Frankfurt, Germany. The ECB yesterday left its benchmark interest rate unchanged at 1 percent as markets wait to see if it will scale back special lending to banks introduced during the financial crisis. [Shanghai Daily] |
![The euro sculpture is seen in front of the European Central Bank in Frankfurt, Germany. The ECB yesterday left its benchmark interest rate unchanged at 1 percent as markets wait to see if it will scale back special lending to banks introduced during the financial crisis. [Shanghai Daily]](http://images.china.cn/attachement/jpg/site1007/20100305/001fd04cea510cfaacf120.jpg "The euro sculpture is seen in front of the European Central Bank in Frankfurt, Germany. The ECB yesterday left its benchmark interest rate unchanged at 1 percent as markets wait to see if it will scale back special lending to banks introduced during the financial crisis. [Shanghai Daily]")
The European Central Bank (ECB) decided to keep its main interest rate steady at a historical low of 1.0 percent on Thursday, as the ongoing Greek fiscal crisis disturbed the ECB's "exit strategy."
The Frankfurt-based bank also kept the interest rates on the marginal lending facility and the deposit facility at the level of 1.75 percent and 0.25 percent, respectively. These unchanged monetary policies were in line with earlier market expectations.
"The economic recovery in the euro area is on track, although it is likely to remain uneven," Jean-Claude Trichet, chief of the ECB, said in a statement during a press conference.
Trichet quoted data agency Eurostat's released figures, saying that the euro area real GDP (gross domestic product) in the fourth quarter 2009 slightly gained 0.1 percent from the third quarter, which also grew 0.4 percent in quarter-on-quarter terms.
"The latest data support the assessment that in the medium term, the inflationary pressures associated with monetary developments are low," he said. "The current key ECB interest rates remain appropriate."
Although the ECB's governing council reiterated its willingness to gradually implement liquidity-absorbing measures, analysts believed the soaring budget gap of Greece and some other EU countries would delay the ECB's actions.
On Wednesday, the Greek government unveiled its revised budget cut plans, pledging to slash some 4.8 billion euros (6.5 billion U. S. dollars) by suspending pensions, cutting public labor wages and raising taxes, after its public deficit had reached 12.7 percent of GDP, four times of the accepted eurozone limit.
Economists said the Greek debt crisis has shaken market faith in the euro and hampered the already-fragile recovery of the European economy, with fears that the possible collapse of Greece would trigger a chain reaction, especially when some other European countries, such as Spain and Portugal, were also in poor financial balance.
"A strong focus on expenditure reforms is needed," Trichet stressed. "High levels of public deficit and debt place an additional burden on monetary policy and undermine the Stability and Growth Pact as a key pillar of Economic and Monetary Union."
Greek Prime Minister George Papandreou is to meet German Chancellor Angela Merkel on Friday, when the two leaders, as widely expected, might discuss the EU's economic aid for Athens.
However, both Germany and Greece denied any possible aid. Papandreou released a statement on Thursday, saying that "Greece is not asking for a penny from German taxpayers. We are asking for political support, not financial aid."
