Bank Chief Rejects Calls to Rescue Euro Zone

Mr. Draghi, who took office at the beginning of the month, implicitly rejected calls for the E.C.B. to use its enormous financial resources to stop the upward creep of borrowing costs for Spain and Italy, which threaten their solvency and by extension the European and global economies.

On Thursday, José Luis Rodriguez Zapatero, Spain’s prime minister, demanded that the E.C.B. find a solution to the euro crisis, saying that “this is what we transferred power for.”

But Mr. Draghi said the E.C.B. would not deviate from its focus on price stability and suggested that other measures could undercut the bank’s credibility.

“Gaining credibility is a long and laborious process,” Mr. Draghi said at a gathering of bankers in Frankfurt. “But losing credibility can happen quickly — and history shows that regaining it has huge economic and social costs.”

He criticized leaders for taking too long to act on decisions they have made at numerous European summits. “Where is the implementation of these longstanding decisions?” he asked. “We should not be waiting any longer.”

If collapse of the euro seemed imminent, the E.C.B. would become lender of last resort to countries like Italy, many analysts say. But the bank seems to be far from the point, instead insisting that countries take steps to cut budget deficits and improve their economic performance.

Jens Weidmann, president of the Bundesbank, the German central bank, was more blunt than Mr. Draghi in rejecting use of the E.C.B. to get governments out of financial trouble, reflecting the hard line that German policy makers have taken on the issue.

“The economic costs of any form of monetary financing of public debts and deficits outweigh its benefits so clearly that it will not help to stabilize the current situation in any sustainable way,” Mr. Weidmann said at the same event, the Frankfurt European Banking Congress.

He put the onus on governments to address deficiencies in their national economies. “These deficiencies include a lack of competitiveness, rigid labor markets and the failure to seize opportunities for growth,” he said.

Article source: http://www.nytimes.com/2011/11/19/business/global/bank-chief-rejects-calls-to-rescue-euro-zone.html?partner=rss&emc=rss