European Central Bank president Mario Draghi says there's "no external savior" for heavily indebted governments in the 17-nation eurozone and gave no indication the bank is ready to step in and support their finances.
Investors had hoped the ECB would increase its support for financially weak countries like Italy with bigger purchases of their government bonds once European leaders had agreed to tighten controls of national budgets.
So far, the ECB has made some purchases but kept them limited, stressing that governments must not rely on such help.
Draghi said governments had reached a "breakthrough for clear fiscal rules" at last week's summit, where 26 of 27 EU leaders agreed to seek a treaty toughening the enforcement of rules against excessive national debt and deficits.
But he offered no support for the notion that the ECB might now increase its bond purchases. Instead, governments need to take the tough steps to balance budgets and reform economies to promote growth.
"I will never be tired of saying that the first response ought to emanate from the country," Draghi said Thursday at a speech in Berlin. "There is no external savior for a country that doesn't want to save itself."
As a "firewall" to calm markets in the meantime, Draghi said, the EU has its newly strengthened bailout fund.
Draghi stressed that the purchases were "neither eternal nor infinite."
The purchases of the government bonds of Italy or Spain drive up their prices and push down their yields, or interest rates, which move in the opposite direction. The lower yields mean better terms when Italy or Spain sells bonds directly to investors at auctions.
"The crisis has not ended yet. It is now important not to lose momentum and to swiftly implement all those decisions that have been taken to put the euro area economy back on course," he said.
Investors were clearly disappointed with the EU summit's deal, with many economists noting it doesn't address short-term fears about whether governments will be able to borrow at affordable interest rates and pay off maturing debt in the next few months.
The euro has tumbled below $1.30 for the first time in 11 months, stocks have dropped, and the bond yields of Italy _ considered the next weakest link in Europe's debt crisis _ have edged up. On Thursday, markets were steady after Draghi's comments, suggesting they had prepared for the ECB to shy away from more aggressive action.
Draghi defended the EU summit's deal, saying it had drawn "comments that were more negative than it deserved."
He rejected any idea that the ECB should engage in so-called quantitative easing to support growth, as the U.S. Federal Reserve or Bank of England have done, although Draghi mentioned neither country by name.
Quantitative easing involves creating new money through purchases of securities from banks. More money in the economy can spur growth when an economy is slumping, but can cause inflation when and if growth picks up.
Draghi said the economies of countries that have done quantitative easing show no "stellar performances at all" when it comes to "unemployment, growth and especially inflation."
Jens Weidmann, Germany's top central banker, has vociferously opposed more aggressive action from the ECB, saying a bigger bond-buying program would violate the ECB's mandate to fight inflation and could compromise its legal independence. While the Bundesbank has only one vote at the ECB, analysts say vocal public opposition from Weidmann would be a serious obstacle for any U-turn by the ECB on bond purchases, since it would undermine its communication on the topic.
His position also has considerable support among economists and politicians in Germany, the eurozone's largest member.
Meanwhile, the volatility in financial markets and the tighter credit conditions are hurting the real economy. Draghi acknowledged that planned austerity measures in the eurozone will lead to a brief contraction in economic growth. He added, however, that the return of investors' trust and much-delayed economic reforms will mitigate the downturn.
Draghi stressed that the European Financial Stability Facility, the current EU bailout fund, would serve as the "firewall" against the crisis.
Governments have agreed on ways to increase the fund's lending power and are seeking outside investors such as countries in emerging markets to contribute to its lending power, so far without much progress.
Economists say the EFSF remains too small to counter the crisis that has seen Greece, Ireland and Portugal seek bailouts from other eurozone governments and the International Monetary Fund.
The ECB has served as lender of last resort for the banking system when financial institutes cannot borrow elsewhere, even as it refuses to play that role for governments.
Draghi noted the ECB is fighting to avoid a credit crunch by helping private-sector banks get more access to loans _ from as short as overnight to as long as three years. It has also cut the requirement for reserves that must be kept on deposit with the ECB, freeing up capital for banks. He said the use of those facilities should not create a "stigma" for those banks.
Uncertainty about economic policies and volatility on financial markets are among the factors causing banks trouble, making it more difficult for them to raise additional capital where needed and secure long-term funding.
"There is a general uneasiness as it was right after the Lehman Brothers case," he said, in a reference to the 2008 bankruptcy of the U.S. investment bank that was seen as a key trigger of the global financial crisis.
McHugh contributed from Frankfurt, Germany.