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ECB president Mario Draghi left the interest rate unchanged for a second month in a row. In the press conference, Draghi will explain the decision, discuss the LTRO and will likely be “grilled” on the ECB’s contribution to the Greek bailout.

Follow all the updates in the live blog, as Greek news continue to flow and a report about a “done deal” by the FT rocks the markets.

Live Blog

13:15 GMT All times are GMT. You can watch the press conference here

13:17 EUR/USD now crossing 1.33 on the reports of a done deal in Athens.

13:22 The pair didn’t go too far after crossing the 1.3280 line. Details from Athens are still awaited.

13:28 Press conference about to begin as EUR/USD retreats to 1.3277.

13:32 Presser begins: Inflation likely to remain high before falling.

13:32 Tentative signs of stabilization around the turn of the year. Downside risks remain.

13:33 High uncertainty also remains.

13:34 LTRO: National eligibility criteria loosened. Non standard measures temporary by nature. EUR/USD drops to 1.3255.

13:35 Stabilization is tentative and at low levels.

13:36 Stress has diminished thanks to LTRO and to “fiscal compact” as well as actions by governments.

13:37 Commodity prices remain high,  protectionist pressures and uncertainty remain problematic.

13:37 Inflation in 2011 was 2.7%, will likely to remain high before falling. Price risks remain balanced. Main driver in 2011 was commodities.

13:38 Monetary expansion remains subdued. This reflects weakening monetary dynamics towards the end of the year. EUR/USD now stabilizes around 1.3260.

13:39 Bank lending conditions tightened in late 2011, for specific countries. The LTRO impact is still unfolding and is still not reflected. More measures are still to be implemented.

13:40 Price pressures should remain limited. Fiscal discipline and reforms are necessary. Governments should do their best to meet fiscal targets for 2012. This will strengthen confidence.

13:41  Ambitious reforms needed

13:42 Questions begin

13:42 Q: What about Greek bonds? Delivered to the EFSF? Risk of fragmentation of banks?

13:43 Answer: Nothing on Greece regarding ECB bond holdings!  What “I can say” is that an agreement has been reached and has been endorsed by the parties.

13:44 LTRO prevented a major credit crunch. Credit has been tightening.

13:45 “We extended the criteria” in order to widen the criteria. “It means we take more risk” and we “manage the risk very well”. Draghi is speaking very firmly.

13:46 The situation could have been worse. EUR/USD likes Draghi’s workds and climbs to 1.3290.

13:47 “The purpose is to finance the real economies” – 80% of the employment.

13:48 “We are concerned by the slowing down in credit”. Bank lending survey doesn’t reflect the effects of the LTRO. Mentions second LTRO (February 29th).

13:50 LTRO addresses risk aversion and liquidity, which feed each other.

13:52 “The use of these proceeds is a business decision”. We try to help the real economy.

13:53 The most marked one was in Spain, and not in Italy. Hmmmm

13:54 We are looking to see if what we are doing impacts the real economy, once again.

13:55 How big will the LTRO be? “We come from a very weak fourth quarter”.

13:55 We have more evidence of stabilization, despite high uncertainty. EUR/USD is also stabilizing around 1.3280.

13:56 Experts say that the next LTRO should be close to the previous one (489 billion euros), but “I don’t know”.

13:57 National Central Banks (NCB) will be accountable. The Bank of Italy will assess this and bring it to the ECB’s governing council.

13:58 Q: What about the “spirit treaty”, Greeks want ECB money. A: Absolutely. This is still my position. All the talks about the ECB sharing the losses are unfounded. But I can’t say anything until tonight. Quite confusing.

14:00 The ECB cannot give money to the program – this will violate the treaty.

14:01 Q: Will bonds held up to maturity?

14:02 We will not pre-commit to buying bonds. This is temporary. These are special operations.

14:03 Regarding maturity: “We have no reason to change this”.

14:04 The euro-area budgets are better than Japan and the US. The euro area as a whole.

14:05 Refuses to answer about rejecting the NCB’s proposals.

14:06 “I have respected the mandate of the ECB for inflation”. It’s a very short time.

14:07 There was a wide agreement but no  consensus. Collateral claims are selected very careful.

14:10 We are not a negotiating party in the PSI. We “get vibrations” about an upcoming agreement. Everybody has been talking about the ECB’s contribution and the ECB also now says nothing. “It is not our intention to violate the treaty”.

14:12 “We have no idea who is going to benefit most” – it depends on the banks and the interbank market in each country. If the interbank market functions, smaller banks don’t get money from bigger banks (which “hoard” money).

14:13 He doesn’t say where the banks come from. “The EFSF is like governments”. If you lose money on bonds, it is monetary financing.

14:14 Will the euro area economy grow in 2012? We are less pessimist than the IMF.

14:16 The fiscal compact is a big event: the governments release some  sovereignty and they do it in their primary legislation – through constitutions. The first timid step towards fiscal union, but not a transfer union. The compact shows that all countries can stand on their own.

14:19 Target2 system problem for Germany: This is inherent in a monetary union. Normally there aren’t problems.

14:20 EUR/USD moves forward: 1.3305.

14:21 I don’t want to comment about the ECB holdings, highly premature to say anything about it. No plan B for Greece.

14:24 Interventions should be multilateral and not unilateral.

14:25 Relief for Ireland as well? Ireland should be praised for the progress with reforms.

14:26 “Greece is unique for everything”  

14:27 Was that a hint about accepting losses on Greek bonds? EUR/USD is  trading  high

14:28 Q: Would giving up on gains make a loss? The LTRO is for being used. No stigma on using the ECB money.

14:28 Draghi mocks the “virility” of some banks, that made some statements. Taking ECB money is a business decision. Draghi is reading a lot of papers recently.

14:29 Press conference ends. Draghi seems extremely confident. Wait, one more thing

14:30 EFSF = governments. If the ECB distributes profits to governments, that’s not monetary financing – this is the key for ECB contribution.

Read the analysis of this last statement.


There was some talk about a rate cut in the euro-zone, given the slide into recession. Nevertheless, there were at least 5 reasons to skip a cut this time.

And indeed, Draghi left rates unchanged.

At the same time that the presser begins, the US will release fresh jobless claims numbers which came out better than expected: 358K.

For more about the euro, see the EUR/USD forecast.