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Euro is irreversible, says ECB

August 02, 2012 20:23 IST

The European Central Bank on Thursday asserted "euro is irreversible" and promised intervention in the bond market to bring down the borrowing costs for debt-ridden Spain and Italy.

"(The ECB) may undertake outright open market operations of a size adequate to reach its objective," ECB President Mario Draghi said at the much-awaited press conference at Frankfurt.

The details of the operations to help Spain and Italy to raise funds at competitive rates would be worked out in the coming weeks, he added.

Replying to questions on the future of European currency, Draghi said, "the euro is irreversible."

A few weeks ago, there were widespread fears that the 17-nation currency would collapse as more countries like Spain came under the European sovereign debt crisis.

Earlier in the day, the ECB announced its decision to keep the benchmark interest rate unchanged at 0.75 per cent disappointing the bond market that was expecting some concrete steps as promised by Draghi earlier.

The ECB chief last week had promised to take steps to save euro and intervene in the market to push down the borrowing costs for debt-ridden European countries.

The stocks in Spain plummeted more than 5 per cent in absence of specific ECB announcements for bringing down the borrowing cost.

Draghi also ruled out the possibility of reducing the interest rates which banks earn for depositing money with the ECB to below zero saying that it was not on the table as of now.

Pointing out that the move would be in "largely uncharted waters," Draghi said, ECB did discuss the possibility but felt "this was not the time and that's it."

The move, it is felt, would prompt commercial banks to lend money to promote economic activity, instead of keep money with the ECB.

"The endorsement to do whatever it takes to preserve the euro as a stable currency has been unanimous," Draghi said, amid reports that Germany's central bank had reservations about ECB buying bonds to deal with European debt problems.

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