ECB Holds Rates Steady, Seeks to Rein in Greek Crisis


The European Central Bank (ECB) held its main interest rate steady at a record low of one percent on Thursday as governors sought to keep the Greek debt crisis from threatening the entire 16-nation eurozone.

Meeting in Lisbon for a twice-yearly gathering away from the ECB’s Frankfurt headquarters, governors faced the biggest challenge to Europe’s single currency in its 11-year history.

On Monday, the ECB did an unprecedented U-turn by saying it would accept Greek debt as collateral for central bank loans even if the debt was downgraded to junk status, as the ratings agency Standard and Poor’s has done.

The move provided crucial relief to Greek banks and the government. It was also approved by analysts who have nonetheless begun to wonder if the central bank is being subjected to political pressure.

Many now expect the ECB to resort to more aggressive measures such as buying government bonds to lend exceptional support. The ECB has already made several U-turns” and could now make another, he told AFP. The Greek crisis has slashed the value of the euro against that of other major currencies.


TradingEconomics.com, AFP
5/8/2010 7:54:16 PM