European Central Bank President Mario Draghi is under pressure to reveal Plan B. A botched attempt to rescue Cyprus last month sent bank shares tumbling across the euro area and rattled confidence in policy makers’ ability to tame the sovereign debt crisis. With doubts growing about Draghi’s forecast for a second-half economic recovery, he’s considering his options.

They range from an interest-rate cut to a new round of long-term loans to banks, to a plan to encourage lending to companies, three officials with knowledge of the deliberations said. They stressed that such action may not be announced today. “They have to start thinking about a plan for unconventional measures if the recovery does not materialize,” said Martin van Vliet, senior euro-area economist at ING Bank NV in Amsterdam. “It may be too early for them to do that this month, but I’d expect Draghi to acknowledge that the economy is not improving and the chances of a surprise are bigger than they were.” With Europe entering a second year of recession and fragmented financial markets preventing the ECB’s record-low borrowing costs from reaching the countries that need them most, Draghi may prefer to use so-called non-standard measures. He is particularly concerned about a lack of credit being extended to small and medium-sized companies in countries such as Italy and Spain, two of the officials said on condition of anonymity. Rates on Hold The Frankfurt-based ECB will leave its benchmark rate at a record low of 0.75 percent today, according […]

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Draghi Considers Plan B as Sentiment Dims Post Cyprus Fumble

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