Wednesday, 3 July 2013

ECB Says Debt Crisis Weighed on Role of Euro in Global Markets

By Jana Randow

European Central Bank President Mario Draghi said unsound public finances in the euro area have curbed the single currency’s use in global financial markets.

“In 2012 the euro-area sovereign debt crisis continued to weigh on the international use of the euro, which declined moderately in some market segments,” Draghi said in the foreword of an ECB report published today on the international role of the currency. “The persistent fragmentation of the euro-area financial system is one of the main underlying causes of these developments, as it affects the depth and liquidity of euro-area capital markets.”

The 17-nation region is struggling to emerge from a sovereign debt crisis, now in its fourth year, that has led to five countries seeking bailouts and fostered speculation about a breakup of the currency bloc. Since European leaders agreed last year to set up a banking union and the ECB committed to backstop the euro with its Outright Monetary Transactions program, confidence has returned, according to the report.

The euro’s share in globally disclosed foreign-exchange reserves declined to 23.9 percent at the end of 2012 from 25.1 percent in 2011, the ECB said.

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