Euro Zone Interest Rate Remains Unchanged - NYTimes.com - 0 views
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But some analysts warn that the calm could prove temporary because the underlying causes of the crisis remain: too much debt and poorly performing national economies. “The E.C.B. has been very active since Mr. Draghi has been president, and this has been a major factor contributing to stabilize financial markets and thereby avoid much worse outcomes for the euro zone,” Marie Diron, an economist who advises the consulting firm Ernst & Young, said in a note.
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“But the E.C.B. is not the sole actor and cannot save the euro on its own,” Ms. Diron said. “Ultimately the sustainability of the euro zone is down to structural changes at the country and European levels that are beyond the E.C.B.’s remit.”
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Banks in the euro zone can borrow unlimited funds from the E.C.B. at the benchmark rate, provided they post collateral. But banks are not obligated to pass that rate on to their customers and might not do so in countries like Spain where banks are already struggling with large numbers of bad loans.
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Meanwhile, interest rates may be too low for countries like Germany, helping to fuel a rise in real estate prices, Dirk Schumacher, an economist at Goldman Sachs in Frankfurt, said. “Cutting rates in the current environment of segmented markets is likely to boost growth in those places where it is needed least,” he wrote in a note to clients before the rate decision.