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Draghi: The Buck Does Not Stop With ECB

Thursday, 4 Apr 2013 | 12:06 PM ET
'Buck Does Not Stop With ECB': Draghi
Mario Draghi said the ECB cannot compensate for a lack of reforms by euro zone governments."The buck does not stop with the ECB," he said.

The European Central Bank can not compensate for a lack of capital in the banking system, or for a lack of reforms by euro zone governments, ECB President Mario Draghi said at a press conference on Thursday. "The buck does not stop with the ECB," he said.

Draghi said the central bank would keep monetary policy accommodative "for as long as needed", after the ECB announced it would keep its benchmark interest rate unchanged at 0.75 percent.

His comments led to a sharp decline in the euro, with the single currency falling 0.7 percent against the dollar, before it rebounded. European shares also extended losses, before paring back.

Draghi added that economic weakness was spreading to countries where fragmentation was not an issue. The comments were seen as bearish for the markets.

It was the ninth month in a row that the ECB kept interest rates steady.

The decision comes at a time of heightened uncertainty for the euro zone after bank depositors in Cyprus were forced to contribute to a bailout for the country.

(View More: Draghi: 'Cyprus is Not a Template')

It was the first time losses were imposed on savers in a euro zone bailout, raising fears of a capital flight and a renewed outbreak of the debt crisis in southern Europe.

Despite the turmoil in Cyprus, most economists had forecast the ECB would keep rates unchanged.

"They don't need to cut rates and they still need to keep their gunpowder dry... so really I can't see interest rates going down much further from here," James Round, vice president at Landesbank Baden-Wurttemberg (LBBW), said after the ECB decision.

Risk appetite was boosted earlier on Thursday, after the Bank of Japan announced new aggressive monetary easing, promising to double the size of its monetary base over the next two years.

(View More: Draghi: ECB Can't Do Everything)

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Contact Europe: Economy

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