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The president of the European Central Bank, Mario Draghi, has said the worst of Europe's sovereign debt crisis is over, adding that the ECB will act 'immediately' if its program of providing cheap funds to European banks leads to an increasing risk of inflation.
LONDON, UK – European Central Bank President Mario Draghi has said the worst of the euro zone crisis is over and the situation in Europe is “stabilizing.”
In an interview with Germany’s Bild newspaper, the ECB chief said that some economic data, including inflation, current account and budget deficits, shows that Europe is doing better than the US, although he cautioned that euro zone leaders still had work to do to make the euro zone “crisis-proof for the long-term,” saying “the ball is in the governments’ court,” the BBC reports.
“The worst is over, but there are still risks. The situation has stabilized,” he said, adding that “investor confidence is returning and the ECB hasn’t had to buy government bonds as a support for weeks.”
Draghi is credited with having staved off a credit crunch and calming financial markets by making a trillion euros' worth of cheap three-year loans available to hundreds of banks across the EU in December and February, a step he described as “powerful medicine.”
He sought in his interview with Bild to allay German concerns that the injection of new funds into European banks could be inflationary, saying that much of the money had been used by banks to cover their financing needs and not found its way into the economic system, according to Reuters.
Calling Germany a “role model” in Europe thanks to its culture of stability, Draghi said that if inflation risks grow the ECB “will immediately act pre-emptively” to avert price rises, Bloomberg reports.