“I will never comment on ratings as such, but certainly one needs to ask how important are these ratings for the marketplace overall, for investors?” Draghi said at the European Parliament in Strasbourg. “It seems to a great extent markets have anticipated these ratings changes and priced them in. We should learn to do without ratings, or at least we should learn to assess creditworthiness with less reliance on the ratings companies", he said.
Draghi nevertheless said growth prospects in the euro region are “dismal” and that the situation is “very grave”. The ECB, which last week kept its benchmark rate at a record low of 1 per cent, in December cut its 2012 growth forecast for the euro area to just 0.3 per cent from 1.3 per cent. “We see that the key refinancing markets for banks are clogged; the interbank market is basically not functioning”, he said. “The unsecured bond market was not functioning -- completely not functioning -- until we launched this facility. We have avoided a major credit crunch, even though in some parts of the area this credit crunch is “already on its way.”
Draghi indicated the ECB will continue to intervene in bond markets to limit yields without ramping up its purchases for fear of breaching the prohibition on monetary financing. “The ECB, within the primary remit of price stability and within the remits of the Treaty, will do whatever it takes to assure financial stability”, he said. Draghi urged politicians to implement budget reforms to win back investor confidence and overcome a debt crisis that has now entered its third year.
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