Further downside risks to euro area growth have materialized and indications for the second quarter point to weakened growth and heightened uncertainty, European Central Bank (ECB) President Mario Draghi said on Thursday.

“Downside risks to the euro-area economic outlook have materialized,” Draghi said yesterday at a press conference following the rate cut announced by the central bank.

“Economic growth in the euro area continues to remain weak with heightened uncertainty,” he said, adding that the rate cuts may have only a muted effect.

The ECB cut its refinance rate by 25 basis points to a record low of 0.75%. It also cut the deposit rate on money parked by banks at the ECB to zero from 0.25% and lowered the rate on its marginal lending facility to 1.5% from 1.75%.

Loan growth in the euro area remains subdued, Draghi said. "To a large extent, subdued loan growth reflects the current cyclical situation, heightened risk aversion, and the ongoing adjustment in the balance sheets of householders and enterprises, which weigh on credit demand," he said.

Draghi said it was essential for banks to continue to strengthen their resilience where it is needed.

He added that the ECB welcomed decisions taken at the European Union summit last week to address financial-market tensions, restore confidence and revive growth. He also said that the ECB welcomed the possibility of a single supervisory mechanism to recapitalize banks directly.

Draghi said that inflationary pressure has been dampened by the risks to growth, he said.

"Beyond the short term, we expect the euro-area economy to recover gradually but see momentum dampened by number of factors," said Draghi at the press conference.

Such factors include tensions in euro area sovereign-debt markets and high unemployment, which will weigh on underlying growth momentum, he said. "Risks surrounding the euro area continue to be on the downside," he added.