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ECB Under Political Pressure to Do More

Hannelore Foerster | Getty Images News | Getty Images

The European Central Bank is under increasing political pressure to act to save the euro zone's moribund economy, with the Irish head of state the latest high-profile leader to urge the central bank to change course.

Ireland's President Michael Higgins said on Wednesday that the European Central Bank (ECB) must reform or risk social upheaval in Europe.

"We have 26 million people un-employed . . . and 112 million at risk of poverty, a contraction in investment and falling demand," Higgins said in an interview with the Financial Times published on Wednesday.

On Thursday, the central bank cut its main refinancing rate by 25 basis points to 0.5 percent to encourage growth in the euro zone, but some economists believe a cut would be merely symbolic and the ECB needs to do more via targeted lending to the real economy.

According to Higgins, whose role is largely ceremonial, European Union leaders needed to implement "radical economics" and have a "radical rethink" of how they were dealing with the region's crisis.

His comments came as protestors marched against austerity in several European capitals on the May Day holiday. Criticism of austerity has grown as the euro zone unemployment rate hit a new record high and social policy experts warned that one in four children in the region face lower life expectancy and fewer opportunities.

(Read More: Children's Life Chances in Poverty-Stricken Europe Decrease)

"With fiscal policy hamstrung by Europe's dogma, everything has come down to monetary policy," Kit Juckes, global head of foreign exchange strategy at Societe Generale, told CNBC on Thursday.

"There's been political pressure on the ECB for a long time...but there's always pressure on them to do more and the bank can only do so much, there are rules," Juckes said, adding that the ECB had an inflation, rather than growth, mandate.

"It's like everyone is telling the ECB: 'We want you to do something magical but you can't use a magic wand'."

Last month, Spanish Prime Minister Mariano Rajoy called for the ECB to be granted the same powers as the U.S. Federal Reserve.

"We must all ask ourselves whether the ECB should have the same powers as the rest of central banks in the world," Prime Minister Mariano Rajoy said in April. "We need to give ourselves the instruments that are available in other regions. Europe is going through a decisive moment which requires setting the rules of the game clearly."

(Read More: ECB Rate Cut Could Be Too Little, Too Late)

Both the Organization for Economic Cooperation and Development (OECD) and International Monetary Fund (IMF) also urged the ECB to do more in recent months. IMF Managing Director Christine Lagarde said last month on the sidelines of its annual meeting in Washington that "the ECB still has room to maneuver."

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"There is a strong case to ease monetary policy further, given weak demand and inflation well below the ECB's objective," the OECD said in March. "More specific forward guidance could be given by the ECB. Further thought should be given to how to expand quantitative easing."

(Read More: ECB Seen Joining Central Banks With Rate Cuts)

Meanwhile, the ECB has also come under fire for its handling of the Cyprus crisis, where losses were imposed on bank depositors for the first time in the euro zone crisis.

(Read More: ECB Rate Cut Could Bring Big 'Disappointment')

"The big question is, did the ECB help Cyprus or did it make things worse?" Nicholas Papadopoulos, chairman of the Cyprus parliament's Committee on Financial and Budgetary Affairs said recently. "My opinion is that it made things worse."