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Wednesday, May 16, 2012

European Central Bank Urges Greece to Stay, but Signals Limit to Support

FRANKFURT—European Central Bank President Mario Draghi urged Greece to remain a member of the 17-member euro zone, in his first public comments on the possibility that Greece's political turmoil may force its exit from the currency bloc.

"Our strong preference is that Greece will continue to stay in the euro area," Mr. Draghi said in a speech honoring departing ECB board member Jose Manuel Gonzalez-Paramo.

His remarks come days after central-bank heads from Ireland and Belgium signaled that a Greek exit wouldn't be catastrophic for the euro zone, comments that broke a longstanding taboo against ECB officials even acknowledging the possibility that a euro member may leave the bloc.

Mr. Draghi said that whether Greece stays or goes isn't for the ECB to decide, because its founding treaty "does not foresee anything on exit." Mr. Draghi said the ECB remains focused on its anti-inflation mandate and "preserving the integrity of our balance sheet," suggesting the ECB won't go to extraordinary lengths just to prop up Athens.

The ECB said Wednesday it has stopped dealing with some undercapitalized Greek banks at its conventional monetary-policy operations. Read More