The European Central Bank withheld the stimulus of an interest rate cut Wednesday, keeping up the pressure on eurozone politicians to take decisive action -- even as growth predictions worsened and fears intensified that Spain may need help bailing out its banks.
The 23-member governing council left its benchmark refinancing rate unchanged Wednesday at a record low 1.0 percent.
ECB President Mario Draghi cited economic growth forecasts for a gradual recovery this year in justifying the decision not to cut rates this time around. Rate cuts are supposed to help growth by lowering business borrowing cost. Some analysts, however, said the bank's expectations of only a 0.1 percent decline over the full year were overly optimistic.
Analysts say Draghi's hands-off stance Wednesday was meant to underline the need for action on restructuring the euro by the 17-country eurozone's divided and often slow-moving politicians. He has urged leaders to sketch in a vision of how the economies and financial systems of euro member countries can be better linked ahead of a June 28-29 summit at which new ideas to save the euro are to be presented.
One reason for not cutting the interest rate Wednesday "was possibly that the ECB sees current market tensions as a way of focusing politicians' minds on reform efforts," said Michael Schubert at Commerzbank.
Stock indexes rose 2.4 percent in the U.K. and France, as the ECB said it's ready to act if necessary as the growth outlook dims. The Dow gained 2.4 percent.
Yet there is plenty to worry about in Europe. Investors are growing concerned that Spain will need outside help to bail out a banking system creaking under the weight of bad real estate loans. Greece, which has already stuck creditors with a debt write-down and taken two rounds of bailout loans, faces an uncertain future in the euro ahead of a June 17 election. Voters may elect a government that rejects the painful cutbacks demanded by other eurozone countries in return for the bailout loans. If Greece rejects bailout terms, it could go bankrupt and be forced out of the euro.
A Spanish bailout or debt default, or a Greek exit could hurt growth in the United States and Asia by creating losses and fear among banks, which are key to the functioning of the global economy, and by hurting trade. Many U.S. companies get a sizable part of their sales and profits from Europe so a recession there would impact companies and economies around the world.