2 Dec 2011

ECB head warns of growing risks to Europe's growth

3:18 pm on 2 December 2011

The new head of the European Central Bank has warned the economic outlook is worsening as a result of the euro crisis.

In his first address to the European Parliament, Mario Draghi warned the risks to the region's growth have grown.

He called for closer integration of the eurozone's economy if the region is to avoid another debt crisis.

Mr Draghi says credible signals are needed to restore confidence.

He says he is sure that countries overall are on the right track, but a credible signal is needed to give ultimate assurance over the short term.

Mr Draghi says temporary measures by the ECB, such as buying up government debt, will be limited.

Meanwhile, the Bank of England governor says banks should brace themselves to withstand the extraordinarily serious and threatening economic situation.

Sir Mervyn King says the eurozone crisis is the biggest threat to the UK's banking system and has urged British banks to build up their financial reserves in order to withstand the possible consequences.

He suggested those extra financial reserves should come from money the banks would normally have paid in dividends and bonuses.

He says the central bank is making contingency plans in case of a eurozone break-up, but won't go into any details of what these are.

The BBC says Sir Mervyn is essentially telling the British banking industry to batten down the hatches ahead of what could be a massively destructive financial storm, quite possibly involving the collapse of the eurozone.