Mario Draghi verdedigt zichzelf tegen kritiek beleid (en)

BRUSSELS - ECB chief Mario Draghi i on Wednsday (4 April) said talk of an exit strategy from the one-trillion-euro cheap loans programme was "premature", but warned that this was no substitute for reforms.

Speaking at the monthly press conference in Frankfurt, the Italian banker defended the "non-standard" policy - criticised by some economists and the German central bank as a covert money-printing operation.

Draghi said the so-called long-term refinancing operation (LTRO) injecting €1 trillion in eurozone i's cash-strapped banks had averted a credit crunch and calmed markets.

"Any exit strategy talking for the time being is premature," he said, noting that any decision to wind down the programme - as the Bundesbank is calling for - would ultimately have to be endorsed by him.

But he insisted that governments should "take advantage of this window of opportunity and relative peace on the financial markets to undertake structural reforms".

Raising borrowing costs in Spain were a proof of "markets expecting reforms" rather than market 'volatility', Draghi said. "They (markets) are asking these governments to deliver on fiscal and structural reforms, and I don't mean Spain only," he added.

Interest rates on the 10-year Spanish government bonds leaped by 28 basis points to 5.7 percent on Wednesday during an auction in which Madrid was able to sell €2.6 billion worth of bonds. The yields are at their highest level since January.

The disappointing bond auction comes despite fresh austerity measures announced last week, with budget cuts amounting to €27.3 billion this year. But investors are still concerned that Madrid will not be able to meet its deficit targets, after it missed them last year and obtained laxer ones for this year after negotiations with the EU commission and member states.

"The main negative effect, the main risk for the Spanish economy, is the perception that public accounts are not sustainable," economy minister Luis de Guindos told Reuters.

He said this year's target of cutting down the deficit to 5.3 percent of GDP was "very important" but even more so for Spain in 2013 to reach the three-percent deficit ceiling allowed under EU rules - which would restore market confidence.

But while Spain is seeking to curb its government spending, employment rates are deteriorating steadily: over 50 percent of young Spaniards were out of a job in February and almost a quarter of the adult workforce, according to EU statistics published Monday.

Draghi admitted that all the "fiscal consolidation" measures are worsening the recession that has gripped the eurozone, but insisted that this was the only way to get back to "sustainable growth" in the longer term.

"Growth can come from foreign demand and low interest rates," the banker said as the ECB decided to keep its key interest rate unchanged at one percent.