LON­DON- Bank shares led stock mar­kets sharply low­er yes­ter­day af­ter the pres­i­dent of the Eu­ro­pean Cen­tral Bank damp­ened hopes that it would take a big­ger role in deal­ing with the debt cri­sis that has crip­pled the 17-coun­try eu­ro­zone.While re­fer­ring to the need for the bank to abide by cur­rent rules, Mario Draghi gave a broad hint that he had no in­ten­tion of in­creas­ing bond pur­chas­es. His com­ments came af­ter the bank de­liv­ered on mar­ket ex­pec­ta­tions to re­duce its main in­ter­est rate by a quar­ter per­cent­age point to one per cent.

Draghi said he was sur­prised by some in­ter­pre­ta­tions of his com­ments last week that "ad­di­tion­al steps" would be tak­en if the 17 coun­tries that use the eu­ro agreed to clos­er bud­get con­trols.Ger­many and France have pro­posed a plan on clos­er fis­cal uni­ty that will dom­i­nate de­bate at the EU sum­mit of lead­ers, which start­ed late yes­ter­day."If the ECB re­mains un­will­ing to play a larg­er role in help­ing the re­gion through this cri­sis, it might be dif­fi­cult for mar­kets to be­lieve a so­lu­tion is pos­si­ble," said Ben­jamin Re­itzes, an an­a­lyst at BMO Cap­i­tal Mar­kets. "This is yet an­oth­er set of min­i­mal­ist moves when bold ac­tion is re­quired."

Stocks have ral­lied over the past week on hopes that if Eu­ro­pean gov­ern­ments can agree to tighter spend­ing over­sight, the ECB would step up its sup­port for the bond mar­kets. It cur­rent­ly buys bonds in the mar­kets, but on­ly re­luc­tant­ly and in small quan­ti­ties.Fol­low­ing Draghi's com­ments, stocks turned neg­a­tive, with bank shares par­tic­u­lar­ly bad­ly hit. Eu­ro­pean, and in par­tic­u­lar Ger­man banks, have been ad­di­tion­al­ly hit by fears that a sur­vey in­to their cap­i­tal needs will show them need­ing more mon­ey to plug po­ten­tial holes.

In Eu­rope, Ger­many's DAX closed down 2 per cent at 5,874.44 while the CAC-40 in France fell 2.5 per cent to 3,095.49. The FTSE 100 in­dex of lead­ing British shares was down 1.1 per cent at 5,483.77.Italy's FTSE MIB in­dex un­der­per­formed its peers, end­ing over four per cent down on the day, while the yield on its ten-year bonds spiked 0.58 per­cent­age point high­er to 6.47 per cent and near­er the sev­en per cent lev­el that it trad­ed at as re­cent­ly as last week. (AP)