Highlights: Draghi comments at ECB news conference

FRANKFURT (Reuters) - Following are comments by European Central Bank President Mario Draghi at a news conference after the bank cut its benchmark interest rate by a quarter point to 0.75 percent on Thursday to shore up the euro zone economy, which is on the brink of recession.

The bank also cut the interest rate on its deposit facility to 0.0 percent, effectively encouraging banks to lend their funds in the market to other banks overnight, where they receive a higher interest rate, currently about 0.3 percent.

WHOLE EURO AREA WEAKENING

"We see now a weakening basically of growth in the whole of the euro area, including the country or the countries that had not experienced that before."

ASKED IF COORDINATED WITH OTHER CENTRAL BANKS ON RATE CUT

"The wasn't any coordination that went beyond the normal exchange of views on the state of the business cycle ... economy ... or global demand."

ECONOMIC OUTLOOK

"The risks surrounding the economic outlook for the euro area continue to be on the downside."

"Beyond the short term, we expect the euro area economy to recover gradually, although with momentum dampened by a number of factors. In particular, tensions in some euro area sovereign debt markets and their impact on credit conditions."

STILL HAS POLICY WEAPONS

"There is not such a feeling that we are running low on policy options. We still have all our artillery ready to contain inflationary risk to pursue the objective of price stability.

PURSUING PRICE STABILITY IN BOTH DIRECTIONS

"Let me say one thing. When I say pursue the objective of price stability I mean in both sides, in both directions."

ASKED IF SITUATION IS AS BAD AS IN 2008

"Definitely not. We are not there at all."

ASKED IF RATE DECISION WAS UNANIMOUS

"The decision was unanimous on all grounds.

"There are no diverging views, really diverging views, within the Governing Council... The Governing Council is absolutely compact.

NEGATIVE DEPOSIT RATES

"We have not discussed this, and we don't precommit to any further measure, as usual."

LIBOR SCANDAL

"It does show that a process considered fair and was considered pivotal for the functioning of financial markets was not fair. A lot of action ought to be taken to improve governance of this process ... (both) at the level that contributes the figures, and the level that produces the benchmark.

"It's quite clear that the governance at these two levels was weak ... I don't know what the ECB would have done but I hope it would have done better."

NO OTHER NON-STANDARD MEASURES DISCUSSED

"We didn't discuss any other non-standard measures (such as more LTROS.")

ASKED IF BAILOUT FUNDS ARE BIG ENOUGH

"How big is enough, really? We know what we have, and so we have to make it do. Frankly, right now I think the ESM and the EFSF with the new modalities are enough, are adequate to cope with the risks that ... with the contingencies that we can envisage now."

FINANCIAL TENSIONS A BIT LOWER

"The financial environment (is) nowadays a little less tense than it was a month ago."

ASKED IF ECB COULD BOOST ESM

"I don't think there is anything to gain in destroying the credibility of an institution, asking it to behave outside the limits of its mandates."

SOLVENT BANKS WILL KEEP GETTING ECB LIQUIDITY

"If the bank is solvent, the ECB stands ready to provide all the liquidity they need. That's important. We should not forget; I've been saying this on and on and on since the beginning."

CAN'T CHANNEL FUNDS TO SPECIFIC SECTORS

"The idea that the ECB could channel funds via the banking lending channel to a specific category of firms or households is as wrong as the idea of those who say that the ECB should make sure that banks don't buy government bonds, otherwise it is monetary financing."

INFLATION TO FALL BELOW 2 PCT

"(INFLATION WILL FALL BELOW 2 PCT) in 2013 - and perhaps even before then. But don't ask me exactly the date and the day and the time when this will happen."

NO SIGN OF DEFLATION

"(Deflation) means (a price fall) has to be generalized to countries and across products and sectors; and we see no sign of this in any country."

LTROS EFFECT TO TAKE TIME, CREDIT FLOWS REMAIN WEAK

"The size and the complexity of these two LTROs is such that we cannot expect to see immediate action, and especially as far as the transmission of the LTROs into higher credit flows. But certainly now a few months have passed, and we see that credit flows are actually weak and remain weak."

GROWTH STILL WEAK

"Economic growth continues to remain weak with heightened uncertainty weighing on confidence."

SUBDUED LOAN GROWTH

"To a large extent, subdued loan growth reflects the current cyclical situation, heightened risk aversion, and the ongoing adjustment in the balance sheets of households and enterprises, which weigh on credit demand."

INFLATION OUTLOOK

"On the basis of current futures prices for oil, inflation rates should decline further in the course of 2012 and be again below 2% in 2013 ... Taking into account today's decisions, risks to the outlook for price developments continue to be broadly balanced over the medium term."

INFLATIONARY PRESSURE DAMPENED

"Inflationary pressure over the policy-relevant horizon has been dampened further as some of the previously identified downside risks to the euro area growth outlook have materialized."

NON-STANDARD MEASURES

"All our nonstandard monetary policy measures are temporary in nature, and we maintain our full capacity to ensure medium-term price stability by acting in a firm and timely manner."

(London Treasury Desk +44 207 542 4441)

Source: http://news.yahoo.com/highlights-draghi-comments-ecb-news-conference-123938681--business.html

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