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ECB can't replace government action, mulls all options

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(Globalpost/GlobalPost)

The European Central Bank cannot step into the breach left by a lack of action by eurozone governments to solve the region's debt crisis, but is ready to do whatever it can to play its part, ECB chief Mario Draghi said Thursday.

"We cannot replace lack of capital in the banking system or the lack of actions by governments," Draghi told a news conference after the ECB left its interest rates unchanged for the ninth month in a row.

"The most stimulative measure is to pay the arrears. The ECB cannot replace governments on that front, or on structural reforms," he said.

Nevertheless, the ECB was willing and ready to act and looking at all policy options, both standard and non-standard, to help resolve the crisis, Draghi insisted.

"We are ready to act within our mandate," he said.

With regard to non-standard or anti-crisis measures, "we discussed a variety of measures. We have to be aware of what we can do and what we cannot do," Draghi said.

The ECB was also open to taking on board the experiences of other countries in trying to solve the eurozone's problems, he said.

"We will certainly look at other countries' experiences, what is feasible, institutionally acceptable and effective," he said. "We are thinking 360 degrees on non-standard measures," Draghi said.

Throughout the seemingly never-ending crisis -- which appeared to have abated recently until political gridlock in Italy and the crisis in Cyprus sent shockwaves through financial markets once again -- the ECB has never hesitated to act as firefighter.

It has slashed its key interest rates, pumped more than 1.0 trillion euros ($1.3 trillion) into the banking system to avert a credit crunch and sought to tame borrowing costs in worst-hit countries by buying up their sovereign bonds.

The multi-faceted approach appeared to pay off, allowing the markets to enjoy an extended period of calm.

But calls have arisen for the ECB to come to the rescue once again as tensions re-emerged after elections in Italy ended in a political stalemate and Cyprus's parliament rejected the terms of a tough bailout deal with its international creditors.

Finding a solution was not easy, and would require the participation of all actors, Draghi insisted.

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http://www.globalpost.com/dispatch/news/afp/130404/ecb-cant-replace-government-action-mulls-all-options