European Central Bank Holds Steady on Rates

“The U.S. budget shutdown is a risk if protracted,” Mario Draghi, the central bank president, said at a news conference. But he added that he did not expect the shutdown to last a long time.

Mr. Draghi deflected a question about what would happen if the United States defaulted on its debt because of the deadlock in Washington. He emphasized, though, that the European Central Bank was poised to intervene if needed.

“We have a vast array of instruments,” Mr. Draghi said. “And we exclude no option.”

But no immediate moves were announced. Meeting in Paris, the central bank’s governing council kept its main interest rate at 0.5 percent, where it has been since May.

In his news conference, Mr. Draghi repeated his assurance that the central bank would continue holding rates down, citing continued low inflation. He said the governing council had discussed a rate cut but remained divided on whether one was warranted.

Although the euro common currency is no longer under siege, tension in the euro zone has risen in recent weeks. There had been questions about the survival of the Italian government before Wednesday, when the opposition leader Silvio Berlusconi said he would support the government of Prime Minister Enrico Letta in a vote of confidence.

Asked about Italy, Mr. Draghi said the restrained reaction of financial markets to recent events in Rome showed that the euro zone had become more resilient. While political instability can hurt growth in countries where it is taking place, he said, “it doesn’t really hurt the euro zone as it used to do a few years ago.”

But the partial shutdown of the American government, depending on how long it continues, could undercut demand from the United States, the euro zone’s most important trading partner. Moreover, the political impasse in Washington raises the risk that the United States will hit the debt ceiling and begin defaulting on its debt. Analysts agree a default would be catastrophic for the world economy.

The euro zone has emerged from a recession that lasted a year and a half, but it is a feeble recovery that could easily be derailed by an external shock. “We view this recovery as weak, as fragile, as uneven,” Mr. Draghi said.

Europe has also been affected in recent months by expectations that the Federal Reserve in Washington would soon begin reducing its economic stimulus program — a move that, when it comes, is likely to push up market interest rates at a time when many European countries are already experiencing severe shortages of credit.

Last week, Mr. Draghi said the European Central Bank would consider a fresh installment of unlimited three-year loans to banks at the rock-bottom official interest rate. The low-cost loans are the closest thing that the European Central Bank has to the “quantitative easing” employed by the Fed, and it helps make sure that banks have plenty of cash. On Wednesday, though, Mr. Draghi declined to be specific about when such a move might be coming.

A government shutdown in the United States affects Europe because it unsettles financial markets, and because it reduces demand in the American market that is crucial for European exports — everything from Italian Ferraris to French cosmetics.

“While the direct economic damage will probably be limited if government offices will be allowed to resume business after a couple of days, the political standoff will take its toll on sentiment,” Asoka Wöhrmann, co-chief investment officer of Deutsche Asset and Wealth Management in Frankfurt, said in an e-mail. “It is a bad harbinger for the upcoming — and potentially more serious — debt ceiling decision” in Washington.

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