Mar. 08 - The European Central Bank has lowered its euro zone growth forecast after holding interest rates at record lows, and says things would have been much worse without its dramatic action to pump a trillion euros into the banking system. Andrew Potter reports.
Mario Draghi has been European Central Bank governor for four months. At his monthly news conference, he said the ECB's expected the euro zone to shrink by half a percent this year, taking it to just 0.3 percent growth. (SOUNDBITE) (English) ECB PRESIDENT, MARIO DRAGHI, SAYING: "Based on our regular economic and monetary analysis we decided to keep the key ECB interest rates unchanged." That interest rate remains at one percent. But there appears to be growing unrest among some of the ECB's members, particularly those from German. Bundesbank President Jens Weidmann has criticised the ECB lending trillions of euros to European banks. Draghi says such action was correct, and was crucial in saving the common currency bloc a serious crisis. (SOUNDBITE) (English) ECB PRESIDENT, MARIO DRAGHI, SAYING: "My personal and professional relationship with Jens is excellent. So that's one thing I want to say. I want also to add that nobody, contrary to what some journals and newspapers and magazines have said, nobody is isolated in the governing council." Robert Halver is a trader at Baader Bank, and thinks interest rates will go down in the next 12 months. (SOUNDBITE) (English) ROBERT HALVER TRADER AT BAADER BANK, SAYING: "It's not a big surprise that the ECB left interest rates at 1 percent but I'm sure, I'm a strong believer, towards the end of the year we have two more interest rates cuts because we need each and every support for the financial markets especially regarding Italy and Spain." By lending to struggling European banks the ECB managed to bring down borrowing costs for Italy and Spain. Draghi kept the pressure on European governments to do more for themselves, calling for more reform to avoid future financial disasters. Andrew Potter, Reuters