Friday, January 11th 2013 - 08:32 UTC

An optimistic Dragui sees a “positive contagion” in the Euro zone economy

European Central Bank (ECB) president Mario Draghi spoke on Thursday of a “positive contagion” in the Euro zone economy, saying that the financial situation is improving and growth is set to return in the second half of the year.

Contagion is not only about the crisis, there is a positive contagion when things go well, too, said the ECB chief

In support of his sunny prognosis four years into the Euro-crisis, Dragui cited a set of indicators: cash flowing back to Euro zone banks, Spanish bonds selling at low interest rates and reduced risks on the ECB own balance sheet.

The improved sentiment on financial markets is partly due to the announcement last year the ECB would buy unlimited amounts of government bonds if a country is under market pressure and requests help.

He also mentioned the “significant steps towards greater [EU] integration” made last year, such as plans to create a banking union, as a positive factor.

“Contagion is not only about the crisis, there is a positive contagion when things go well, too,” the central banker said. However he warned governments to stick to reforms and to focus on a “combination of spending cuts and taxation” in the future.

With large swathes of Europe still in recession and expected to return to growth only later this year, the ECB governing council decided to keep the key interest rate at a record low of 0.75%.

For his part, EU Council chief Herman Van Rompuy in Dublin on Wednesday also spoke of a “lag” between the real economy and financial markets. Employment lags even further behind, with high jobless figures to improve only when the real economy is back to solid growth, he noted.

Draghi pointed out that the ECB “mandate is not full employment, like the Federal Reserve, it is price stability.” He added: “But we do take it into account in the overall assessment of the situation.”

Over a quarter of the working population and more than half of young people are currently out of a job in Greece and Spain, with Cyprus and Portugal also posting record job losses in recent months.

1 comment Feed

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1 Britworker (#) Jan 11th, 2013 - 04:13 pm Report abuse
EU integration, what a joke. The European public are mostly against it and moreover many haven't even been asked. Big problems ahead.

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