European Central Bank, Euro Zone | featured news

As Cypriot politicians raced to find a new financial rescue plan ahead of a Monday deadline, tensions built in the streets of the capital. Residents withdrew what money they could from ATMs amid concern the banks could collapse.

The European Central Bank is prepared to cut off funding to Cyprus and let the Mediterranean island succumb to financial meltdown if it has to, confident it has unlimited firepower to protect the rest of the euro zone.

The data is likely to put pressure on the European Central Bank to cut interest rates at its next meeting.

Over the course of five days, the Greek government -- led by the understated conservative Prime Minister Antonis Samaras -- overcame two high hurdles in a dash to qualify for the austerity program set out by the so-called troika, made up of the European Central Bank, the International Monetary Fund and the European Commission.

The euro zone economy shows little sign of recovering before the year-end despite an easing of financial market conditions, European Central Bank Mario Draghi said on Thursday after interest rates were left at a record low.

Britain is pushing for changes to a proposed euro zone banking union to dilute the power of the European Central Bank, EU officials said, potentially hampering efforts to build the infrastructure urgently needed to underpin the euro.

Two years after eurozone began its downward financial spiral, the European Central Bank is about to unveil a widely-anticipated plan to pump more money into the system to stem a wider collapse. But the plan, similar to the massive bond-buying undertaken by U.S. central bankers four years ago, may be too little, too late. “It’s going to take a lot more than a few rate cuts here and there to give us a lift,” said Peter Dixon, a senior economist at Commerzbank Securities. “Monetary policy is effectively running out of options.”

Greece is unlikely to be able to pay what it owes and further debt restructuring is likely to be necessary, three EU officials said on Tuesday, a cost that would have to fall on the European Central Bank and euro zone governments.

Inflation in the euro zone fell to its lowest level in more than a year in May, giving the European Central Bank more leeway to stimulate the flagging 17-nation economy as the intensifying debt crisis takes its toll on confidence.

The European Central Bank stepped up pressure on Thursday for a joint fund to guarantee bank deposits in the euro zone, saying Europe needed news tools to fight bank runs as the bloc's debt crisis drives investors to flee risk.