ECB holds rates; calls for action

European Central Bank President Mario Draghi urged euro zone governments to agree a growth strategy to go hand in hand with fiscal discipline, but as thousands of Spaniards protested in the streets he gave no sign the bank would do more to address people’s fears about the economy.

As ECB policy makers gathered in Spain, one of the countries hit hardest by the euro zone debt crisis, Draghi said the bank’s policy was “accommodative” — or designed to support the euro zone economy — after it held interest rates at a record low of 1.0 percent. Bank chiefs did not discuss making any changes to rates, said Draghi, adding that the euro zone economy was likely to improve this year but the outlook was uncertain and there were risks of decline.

Such weakness should keep a lid on inflation over time, he said, even though it would remain above 2 percent this year in the 17-nation currency area.

“The economic outlook continues to be subject to downside risks,” Draghi told a news conference in Barcelona, where thousands of people protested against cuts in Spanish government spending, which has eaten into health and education services.

Draghi outlined his vision for a European “growth compact” he advocated last week, calling on governments to pursue structural reforms. However, he gave no specifics and put the onus on euro states – rather than the ECB – to act. The Italian said there was “absolutely no contradiction” between pursuing a growth pact and pushing ahead with Europe’s already agreed pact on budget discipline.

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