Following are comments by Mario Draghi at his first news conference as European Central Bank President, held after the bank's Governing Council unexpectedly cut its benchmark interest rate to 1.25 percent on Thursday.

MILD RECESSION IN VIEW BY YEAR END

What we are observing now is ... slow growth heading towards a mild recession by year end.

BOND-BUYING PROGRAMME

Our securities market programme has three characteristics: it is temporary; it is limited; it is justified in restoring the functioning of monetary transmission channels.

ON GREECE

We are closely monitoring the situation and we are absolutely confident that if the measures that have been stated in the programme are going to be implemented ... together with the strengthening of the banking system together with the decision that the European Council has taken with the EFSF ... all this, but first we should go back to the implementation of the right economic policies ... will quieten many concerns.

ITALIAN BOND YIELDS

Asked if Governing Council was focussing on Italian bond yields:

No, We haven't really been focussing on this and other similar situations in our discussions today ... But it is clear that ... the first and foremost responsibility for maintaining financial stability and orderly financial conditions lies with national economic policies.

Limits to long-term effect on yields from bond buying:

It's really, in a sense, pointless to think that sovereign bond rates could be stably brought down for a protracted period of time by outer, external interventions.

CUT IN GROWTH FORECASTS VERY LIKELY

The economic outlook continues to be subject to particularly high uncertainty and intensified downside risks.

Some of these risks have been materialising, which makes a significant downward revision to forecasts and projections for average real GDP growth in 2012 very likely.

GROWTH TO SLOW IN H2

Owing to the unfavourable effect of financing conditions and confidence, the ongoing tensions in financial markets are likely to dampen the pace of economic growth in the euro area in the second half of this year.

RATE CUT

Based on its regular economic and monetary analysis the governing council decided to reduce the key ECB interest rate by 25 basis points. While inflation has remained elevated and is likely to stay above 2 percent for some months to come, inflation rates are expected to decline further in the course of 2012 to below 2 percent.

ON BANK CAPITAL STRENGTHENING

The soundness of bank balance sheets will be a key factor in reducing potential negative feedback loop effects related to tensions in financial markets ... We therefore welcome the agreement of the European Council to proceed with the increase in the capital position of banks to 9 percent of core Tier 1 by the end of June 2012. We also fully support the call to national supervisors to ensure that banks' recapitalisation plans do not lead to excessive deleveraging.

URGES FISCAL CONSOLIDATION

The Governing Council notes the fiscal commitments made in the October 26 euro summit and urges all governments to implement fully and as quickly as possible the measures necessary to achieve fiscal consolidation and sustainable pension systems as well as to improve governance.

(London Treasury Desk)