Asia markets fall after ECB backpedals

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FRANKFURT, Germany, Aug. 3 (UPI) -- Asian markets fell Friday ahead of European trading after Europe's chief central banker demanded eurozone leaders seek bailout funds before his bank intervenes.

The Asia Dow was down more than 1.5 percent, Japan's Nikkei 225 tumbled nearly 1.5 percent and Hong Kong's Hang Seng Index dropped about 1 percent.

Australia's S&P/ASX 200 shed 1 percent and South Korea's Korea Composite Stock Price Index, or KOSPI, fell about 0.75 percent. China's SSE Composite Index in Shanghai rose about 0.5 percent.

The euro hit all-time lows against the Australian and New Zealand dollars and was down about 0.1 percent in Asia at $1.2171 against the U.S. dollar.

European Central Bank President Mario Draghi said Thursday that, under pressure from Germany, the eurozone's central bank would not take imminent action in troubled eurozone debt markets -- even though he pledged July 26 the bank would do "whatever it takes to preserve the euro."

The ECB, which administers the monetary policy of the European Union's 17 eurozone countries, will buy eurozone sovereign debt on the open market only after distressed countries such as Spain and Italy request bailouts from the temporary European Financial Stability Facility and the permanent European Stability Mechanism rescue fund, Draghi said.

"Governments must stand ready to activate the ESM/EFSF in the bond market when exceptional financial-market circumstances and risks to financial stability exist," Draghi told a Frankfurt news conference after the ECB board decided to hold its benchmark interest rates steady.

A requirement for financially struggling governments to seek bailouts, along with commitments to fiscal austerity, "are necessary conditions" for the ECB to buy bonds from those countries, he said.

As Draghi spoke, Italian Prime Minister Mario Monti and Spanish counterpart Mariano Rajoy met in Madrid.

Both leaders said they had no intention of requesting bailout help, which would require commitments to even deeper budget cuts and accelerating economic reforms.

"I don't know if the Italian government will ask to activate this mechanism," Monti said, adding even talking about it now was "premature."

Draghi told reporters government bond purchases by the ECB were strongly opposed by German central bank President Jens Weidmann, even though an ECB proposal to buy shorter-term bonds was consistent with "classical monetary policy."

His comment reflected a growing tension between Draghi and Weidmann, The Wall Street Journal said. The ECB usually keeps such details secret, the newspaper said.

The Deutsche Bundesbank did agree with the overriding objective of preserving the eurozone, Draghi said.

"The euro is irreversible," Draghi said. "It stays. ... It is pointless to bet against the euro. It is pointless to go short on the euro."

U.S. Treasury Secretary Timothy Geithner, traveling in Europe, is to discuss the crisis with Draghi and German Finance Minister Wolfgang Schaeuble in separate meetings Monday.