European Central Bank president Mario Draghi undermined hopes of a rate cut Wednesday, saying the bank’s earlier forecast for a gradual recovery this year is accurate.
The view puts him at odds with outgoing World Bank President Robert Zoellick, who last week compared Europe to the period just prior to Lehman ’s collapse, and said a 2008-style panic is a possibility.
The ECB also left rates unchanged Wednesday, ratcheting up pressure on euro zone leaders to tackle a government debt crisis that threatens the global economy.
“The decision Wednesday by the bank’s 23-member governing council left the refinancing rate at a record low 1%,” according to a report from AP. “The bank is under pressure to stimulate a weakening economy of the 17 countries that use the euro with a rate cut. But [Draghi] said that growth ‘remains weak, with heightened uncertainty weighing on confidence and sentiment’ and cited ‘downside risks’ to growth.”
The wire service notes some investors had been expecting a rate cut and most of the world’s stock markets had moved higher earlier in the day in expectation. However, while most of the world’s share indexes moved lower following the rate decision, they had managed to hold on to some of their early gains.
Draghi told European politicians in Brussels last week that the euro’s basic setup is “unsustainable” and urged them to sketch out a long-term vision for strengthening the euro’s basic institutions over the next few years.
He repeated that call Wednesday, the AP notes, in response to a question about his expectations for a June 28-29 European Union summit.
“What we all expect is a clarification of this vision, a path toward this objective with all the conditions that have to be satisfied to achieve this objective.”