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ECB chief Draghi pledges support for euro

The head of the European Central Bank (ECB), Mario Draghi, pledged on Thursday full support for Europe's single currency as analysts noted that the ECB might represent the euro's last line of defence.

The ‘ECB is ready to do whatever it takes to preserve the euro. And believe me it will be enough,’ Draghi told an investors conference in London.

Financial markets have relentlessly tested the eurozone's ability to overcome debt crises in countries like Greece, Ireland, Portugal and Spain, and the ECB is the European Union institution most able to react quickly to developments.

ECB responses to date include two cash injections of more than one billion euros ($1.21 billion) in the eurozone banking system via long-term refinancing operations and the purchase of government bonds on secondary markets.

The central bank has also cut its benchmark refinancing rate to a record low of 0.75 per cent. Eurozone leaders have agreed meanwhile on measures to help stem the crisis, and Draghi stressed on Thursday that ‘progress has been extraordinary in the last six months.’

But the chronic turmoil shows no sign of abating, with Spanish borrowing costs soaring to dangerously high levels and bailed-out Greece's rescue programme seemingly on the rocks.

‘Without substantial ECB action, the eurozone may soon lose the ability to control the market panic,’ Berenberg Bank economist Christian Schulz wrote in a note to investors this week.

French foreign minister Laurent Fabius has said he hopes that the Spanish government will not need a full bailout, but that if so, it could require ECB action.

Analysts feel the Europe's current anti-crisis strategy is having only a limited effect and the central bank is the only player currently capable of acting fast enough.

The bank could inject even more money into the banking sector, resume its purchases of government bonds, cut interest rates further, or come up with a way to provide eurozone financial rescue funds with more resources, analysts say.
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