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18 December 2011

FT: Draghi warns on eurozone break-up


Mario Draghi has warned of the costs of a eurozone break-up, breaching a taboo for a president of the European Central Bank, even as he sought to play down market expectations about the ECB's role in combatting the sovereign debt crisis.

In his first interview since becoming ECB president on November 1, Mr Draghi said struggling eurozone countries that quit the currency bloc would face still greater economic pain. For remaining members, European Union law would have been broken and “you never know how it ends really”, he said.

Countries that left and devalued their currency would create “a big inflation” and fail to escape from structural reforms that would still have to be implemented “but in a much weaker position”, Mr Draghi said.

To fight the crisis, Mr Draghi stressed the importance of unprecedented measures taken by the ECB to shore-up eurozone banks – which include its first ever offer of unlimited three-year loans this week. He emphasised, however, that the region’s politicians had to take the lead in rebuilding investor confidence in eurozone public finances – by ensuring fiscal discipline and making fully operational Europe’s rescue fund, the European Financial Stability Facility. He emphasised that the ECB would be able to act as agent to the EFSF in financial market operations from January – speeding its implementation.

Full article (FT subscription required)



© Financial Times


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