The head of the European Central Bank has ruled out handing Greece a debt relief lifeline, hours after the head of the eurozone finance ministers admitted that Athens will need additional aid next year.
ECB president Mario Draghi was adamant that the ECB would not participate in any debt restructuring, despite growing speculation that Greece will be unable to fully return to the financial markets when its current bailout ends in 2014.
"It is pretty clear that we cannot do monetary financing," Draghi told reporters in Frankfurt on Thursday, insisting that the ECB's own treaty made it impossible. Asked directly if the ECB would take part in any Greek debt relief, he said: "No", adding that any future assistance for Greece must also come with strings attached, or "conditionality". Greece faces a funding gap of up to €11bn in the second half of 2014, according to figures from the International Monetary Fund. Rumours that a third bailout will be needed have swirled through the financial markets in recent weeks.
Dutch finance minister Jeroen Dijsselbloem, who also chairs the eurogroup of finance ministers, left MEPs in little doubt that euro governments will have to consider some extra help for Greece soon. Appearing at the European parliament, Dijsselbloem said it was "realistic to assume that additional support will be needed" when the existing bailout concludes at the end of next year.
"As far as the potential need for a third programme for Greece is concerned, it's clear that despite recent progress, Greece's troubles will not have been completely resolved by 2014," said Dijsselbloem, who warned that Greece would probably not be able to return to borrowing from the financial markets when its bailout ends. Dijsselbloem said the Eurogroup "stood ready" to help Greece, while rejecting suggestions that a full-blown third bailout package would be needed. He argued that officials would not be able to assess Greece's progress until next April. But according to Reuters, Euro officials may need to take a decision this November.
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The European Central Bank left its main interest rate unchanged at a record low of 0.50% on Thursday, as recent economic data has shown a nascent recovery taking hold in the euro zone.
Strong orders for manufactured goods helped factory activity in the currency bloc rise at the fastest pace in over two years in August and led to backlogs of work for the first time since mid-2011, a survey showed on Monday.
Euro zone inflation is expected to slow to 1.3 percent in August from 1.6 percent in the previous month, EU statistics office Eurostat said last week.
The ECB's goal is just below 2%, though it looks at prices over the medium term. The ECB also left the rate on its deposit facility at 0.0% and held its marginal lending facility - or emergency borrowing rate - at 1.00%.
The markets now turn their attention to ECB President Mario Draghi's news conference, scheduled to begin at 1230 GMT, where he will be asked about the central bank's future plans.
A recent poll shows Germany's anti-euro Alternative for Germany party closing in on a place in parliament. This could cause a huge upset for the established parties -- and dramatically alter the German political landscape
At first glance, the Alternative for Germany's (AfD) campaign ad seems about as threatening as a commercial for the local optician. It features outraged, but pleasant-seeming citizens -- a father and his daughter, a newspaper-reading businesswoman and a cyclist -- looking thoughful while asking questions. "Why is all our money going to Greece, instead of being invested in damaged streets and bridges?", one person asks. "Why are pensioners left with an ever-smaller amount of money in their wallets? Who is paying for the debt that our politicians are accruing?", asks another.
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The party is also trying to send a positive message at campaign events. During a demonstration in Hamburg several weeks ago, a young mother was captured on camera by an AfD campaigner. "There aren't any populists taking part here," she says, blinking into the sunlight. Party leader Bernd Lucke, who made an appearance in a casual polo shirt, encouraged people to "demonstrate peacefully".
Just two weeks before the general election, the anti-euro party is hopeful about its prospects. In a survey published earlier this week, the AfD, for the first time ever, came close to achieving the five percent vote-share required to win seats in the German parliament, the Bundestag. Things had quieted on the AfD front recently, until German Finance Minister Wolfgang Schäuble thrust the Greek bailout back on to the agenda in mid-August.
Data indicators across the euro zone Friday reinforced remarks made Thursday by European Central Bank President Mario Draghi to the effect that while signs of recovery are indeed apparent, they remain weak and somewhat inconsistent.
Industrial output in Germany fell 1.7% on the month in July, the country's economics ministry reported Friday. This was well below expectations of a 0.5% dip in a Dow Jones Newswires survey of analysts.
Berlin - The European Central Bank (ECB) on Thursday (5 September) decided to keep its interest key interest unchanged, despite data showing the eurozone economy out of recession for the first time in 18 months.
It said the rate will stay at 0.5 percent and suggested it may lower it still in the coming months.
"I am very, very cautious about the recovery, I can't share the enthusiasm. These shoots are still very, very green," ECB chief Mario Draghi said at the bank's monthly press conference in Frankfurt.
He mentioned statistics published one day earlier showing the eurozone economy is growing for the first time since mid-2011, albeit by a timid 0.3 percent in the second quarter compared to the first three months of 2013.
With oil prices expected to go up due to the Syrian crisis and with most euro-countries still struggling with deficit, debt and unemployment, the ECB will continue its low-rate policy "for an extended period of time," Draghi noted.
The ECB upgraded its projection for the eurozone economy this year, saying it will only shrink by 0.4 percent compared to a 0.6 contraction predicted in June.
Next year, the eurozone is expected to grow by one percent, compared to 1.1 percent projected three months ago.
Rules for bank test next month
Meanwhile, the ECB and national bank supervisors are working on a set of rules on what data to include in an in-depth review of the balance sheets and assets of eurozone's largest banks.
The test is a precondition for the ECB to take on supervision over these banks.
Draghi said the set of rules will be published by 15 October.
"This is very important for banks, because they want to know how this review will be carried out," he noted.
He added there will be "positive news in the coming days" about the ongoing negotiations with the European Parliament on the Single Supervisory Mechanism.
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