European Central Bank Chief Mario Draghi said there are a few signs of a possible stabilization in the euro area, but economic situation remains challenging.
"Our baseline scenario continues to be one of a very gradual recovery starting in the latter part of this year," ECB President said in a speech in Shanghai on Monday.
The drivers of such a gradual recovery are the highly accommodative monetary policy and export growth, caused by growing foreign demand, Draghi said. The rebound in stock markets is benefiting virtually all economic agents, including corporations, banks and households, he added.
The responsibility to ensure that the bank remains solvent remains with shareholders. Banks' capital position clearly lies outside the remit of central banks, he added.
"If the private sector is unable or unwilling to provide the capital necessary to achieve solvency, it is for the fiscal and regulatory authorities to decide whether and how to act," Draghi said.
Defending ECB's bond buying plan called Outright Monetary Transactions (OMT), Draghi said this initiative was necessary to counteract the threats to price stability.
One year since the announcement of OMT, he said spreads in sovereign debt markets have fallen substantially. Banks have been able to re-access the market, for both funding and for raising capital.
A final criticism of OMTs is portraying them as a means of transferring risks from peripheral to core euro area countries via the ECB balance sheet. Draghi said OMT actually reduced the exposure of German taxpayers to risks on the ECB's balance sheet.
The ECB Chief also said now the 17-nation bloc is a more "stable and resilient" place to invest in than it was a year ago.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.