Will the ECB don the robe of Europe's firefighter?

The unprecedented events in Cyprus in the past two weeks have washed away hopes that Europe is closer to claiming victory over its four year old debt nemesis, adding pressure on the European Central Bank (ECB) to undertake fresh measures to calm jittery investors.

However, experts reckon that despite the threat of a fresh escalation in financial market tensions and subdued inflation, Mario Draghi and his men are unlikely to cut interest rates this week and may refrain from announcing any fresh monetary measures to maintain pressure on sovereigns to resolve the region's ugly debt mess.

The ECB is tipped to leave its key benchmark interest rate at a record low of 0.75 per cent at this week's meet.

From slashing interest rates to a record low to injecting over 1 trillion euro into Europe's banks through its three-year refinance operations and announcing a sovereign bond buying program, the ECB has done everything in its tool kit to help the debt plagued region.

But despite the ECB's best efforts, the 17-member euro area finds itself in the worst recession in four years.

However, the central bank's moves did bring an extended calm to financial markets but the period of peace has been broken by the political deadlock in Italy and the Cyprus bailout saga.

At the central bank's last meet, Draghi admitted that officials did discuss a rate cut. However, economists reckon that economic conditions had not worsened enough to prompt another rate cut.

Read more about: ecb
Story first published: Tuesday, April 2, 2013, 13:30 [IST]
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