Published February 27, 2013
MUNICH – Financial markets in the euro zone are still not functioning well, with firms and consumers having difficulties obtaining bank loans in some countries, European Central Bank President Mario Draghi said on Wednesday.
The ECB is experiencing problems transmitting its record-low interest rates right across the currency bloc. Draghi said last week the bank's top priority is to enhance this transmission process as it tries to support the crisis-hit economy.
"While sovereign debt markets have improved, bank lending is still very fragmented across the euro area," Draghi said in an event organized by the Catholic Academy of Bavaria on Wednesday.
"Credit in some countries is still difficult to obtain. The benefits of the painful actions undertaken so far have not yet materialized."
ECB Executive Board member Benoit Coeure said in remarks published earlier on Wednesday that the central bank was assessing bank lending and indicated the ECB could tweak its collateral rules to help loan availability, if needed.
Draghi rejected claims that the ECB's crisis liquidity measures, used to keep the banking system afloat, could feed high inflation, saying that their impact would not do so until the money flowed into the real economy.
The ECB has given banks unlimited funds since the beginning of the financial crisis, including more than 1 trillion euros in ultra-long term loans roughly a year ago.
The Italian ECB chief also defended the central bank's yet-to-be activated bond-buying program, dubbed Outright Monetary Transactions (OMT), which has come under heavy criticism in Germany, including from the Bundesbank.
Draghi said the program would also work in favor of German taxpayers, not just those in the debt-ridden countries.
(Reporting by Sakari Suoninen and Jens Hack)