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Draghi vows to support eurozone

Draghi vows to support eurozone

(30 July 2012 – Europe) Markets throughout the world responded positively after a pledge from European Central Bank (ECB) president Mario Draghi to do whatever necessary to protect the eurozone from collapse. 'Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough,' Draghi told an investment conference in London to mark the beginning of the Olympics.

'To the extent that the size of the sovereign premia (borrowing costs) hamper the functioning of the monetary policy transmission channels, they come within our mandate,' he said.

The ECB has cut interest rates to record lows and offered banks unlimited liquidity without any meaningful boost to the euro zone economy or bank lending resulting.

The comments are Draghi's boldest to date and suggest the central bank is ready to defend Italy and Spain whose borrowing costs have hit unsustainable levels.

On Wednesday, ECB policymaker Ewald Nowotny broke ranks with his colleagues, saying that giving Europe's permanent rescue fund a banking licence so that it could draw on central bank funds had merits. Draghi and others have previously rejected that option.

Alternatively, the bank could act as the Federal Reserve and Bank of England have, and opt for straight quantitative easing -- money-printing by another name.

Draghi stressed that the ECB did not want to do things that should be done by governments. He refused to speculate on the chance of a country leaving the euro but said that the single currency was 'irreversible'.

'Our job is to maintain price stability in the medium-term. Our job is to cope with financial fragmentation, when it falls within our mandate,' he added.
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