Draghi sees eurozone outlook weak
Source: Agencies |
November 9, 2012, Friday
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Print Edition
Print Edition
EUROPEAN Central Bank President Mario Draghi has warned the economic outlook for the 17 countries that use the euro remains weak despite the "visibly improved" confidence in the region's financial markets.
Draghi spoke yesterday after the bank's governing council left its key interest rate unchanged at the record low of 0.75 percent.
The ECB chief underlined the bank's position that it has done enough to haul the eurozone out of its financial crisis by offering to buy up the bonds of countries struggling with their borrowing costs, such as Spain and Italy. He repeated his call for governments to get things moving by fixing their shaky finances and cutting the bureaucracy and regulations that block stronger growth.
"Economic activity in the euro area is expected to remain weak, although it continues to be supported by our monetary policy stance and financial market confidence has visibly improved on the back of our decisions" to buy unlimited amounts of short-term bonds, Draghi told a press conference in Frankfurt.
The eurozone economy still shows signs of struggling. The region's gross domestic product dipped 0.3 percent in the second quarter. The European Union's executive commission predicts it will shrink 0.4 percent this year, and, perhaps more alarmingly, grow a meager 0.1 percent next year. That means downturns and high unemployment into 2014 at least.
Five eurozone countries are in recession - Italy, Spain Portugal, Greece and Cyprus.
In theory, a cut to interest rates would stimulate the economy by making it easier for consumers and businesses to borrow, spend and invest. Yet low ECB rates and cheap ECB credit to banks are not getting through to the wider economy in the form of more loans. That's often because businesses see no reason to borrow and expand production in a slack economy.
Draghi spoke yesterday after the bank's governing council left its key interest rate unchanged at the record low of 0.75 percent.
The ECB chief underlined the bank's position that it has done enough to haul the eurozone out of its financial crisis by offering to buy up the bonds of countries struggling with their borrowing costs, such as Spain and Italy. He repeated his call for governments to get things moving by fixing their shaky finances and cutting the bureaucracy and regulations that block stronger growth.
"Economic activity in the euro area is expected to remain weak, although it continues to be supported by our monetary policy stance and financial market confidence has visibly improved on the back of our decisions" to buy unlimited amounts of short-term bonds, Draghi told a press conference in Frankfurt.
The eurozone economy still shows signs of struggling. The region's gross domestic product dipped 0.3 percent in the second quarter. The European Union's executive commission predicts it will shrink 0.4 percent this year, and, perhaps more alarmingly, grow a meager 0.1 percent next year. That means downturns and high unemployment into 2014 at least.
Five eurozone countries are in recession - Italy, Spain Portugal, Greece and Cyprus.
In theory, a cut to interest rates would stimulate the economy by making it easier for consumers and businesses to borrow, spend and invest. Yet low ECB rates and cheap ECB credit to banks are not getting through to the wider economy in the form of more loans. That's often because businesses see no reason to borrow and expand production in a slack economy.
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