ECB holds interest rate at 1%

The European Central Bank held interest rates at a record low yesterday, seeing tentative signs of economic stabilisation, but refused to say what part it might play in averting aruinous Greek default.

After days of delay, Greek political leaders clinched a deal on austerity measures needed to secure a bailout to keep the country afloat.

ECB president Mario Draghi said Greek prime minister Lucas Papademos had confirmed to him that the Greek parties had endorsed a deal, as demanded by their European Union and International Monetary Fund lenders, after days of delay.

Mr Draghi told a news conference the ECB had left its main interest rate on hold at 1.0%.

“I’m sorry to say I cannot say anything about how our holdings of Greek bonds ... will be treated,” he said.

Athens has urged the ECB to hand back profits on its Greek bond holdings, a move that could raise €12bn or more to help fill a gap in its financing needs. As of Wednesday, the ECB’s 23-member governing council had yet to agree a position.

Since the beginning of the year, some business surveys have instilled hope that the worst of the sovereign debt crisis has blown over. Mr Draghi said they were only fledgling signs, suggesting rates could yet fall below 1.0% — uncharted territory.

Francesco Papadia, a top ECB official, said on Wednesday that bank liquidity concerns had all but disappeared thanks to the ECB’s December three-year loans, adding that he was tempted to declare “mission accomplished”.