Wednesday

26th Apr 2017

Eurozone on way back to growth, Draghi says

  • Financial markets are having a better sentiment about the euro (Photo: guysie)

European Central Bank (ECB) chief Mario Draghi on Thursday (10 January) spoke of "positive contagion" in the eurozone economy, saying that the financial situation is improving and growth is set to return in the second half of the year.

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

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

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.

He warned governments to stick to reforms and to focus on a "combination of spending cuts and taxation" in the future, however.

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 percent.

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's "mandate is not full employment, like the Fed [the US central bank], it's 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.

For ING Bank economist Carsten Brzeski, the positive spin sounds like a co-ordinated PR effort by EU institutions.

"Draghi sounded positive on financial markets and there was a huge portion of hope that if the situation continues to improve, it will feed into the real economy. This is more or less the EU institutions' view, the question is if they are right," he told this website.

With the ECB's hands tied on unemployment or financial stimuli for the real economy, all it can do is to "keep fingers crossed that the financial markets' magic works and it trickles down to the real economy," Brzeski added.

If it does not happen by April or May, "then we're back in trouble," he said.

ECB unveils new €5 note

The ECB launched a new €5 note on Thursday with a topical joke on the crisis and British euroscepticism.

Eurogroup makes 'progress' on Greek deal

Eurozone ministers endorsed an agreement in principle between the Greek government and its creditors over a new package of reforms. But talks on fiscal targets and debt could still block a final agreement.

New anti-trust complaint looms over Microsoft

At least three security software companies “met several times” with the European Commission to complain about Microsoft’s alleged abuse of its market position. A formal case could follow.

Investigation

MEPs oppose EU agency to prevent Dieselgate II

The European Parliament said on Tuesday that there should be more EU oversight on how cars are approved, but stopped short of calling for an independent EU agency.

News in Brief

  1. Hungary's Orban will participate in EU parliament debate
  2. Malta floats cash-for-refugees plan
  3. Ivanka Trump to meet Merkel at Berlin women's conference
  4. Arctic Ocean could be ice-free in 20 years
  5. Nord Stream 2 to get €4.8bn from European energy firms
  6. Defeated Fillon retires from French politics
  7. Hollande: Vote Macron to avoid 'risk' for France
  8. Italy misses deadline on air quality warning

Stakeholders' Highlights

  1. UNICEFRace Against Time to Save Millions of Lives in Yemen
  2. Nordic Council of MinistersDeveloping Independent Russian-Language Media in the Baltic Countries
  3. Swedish EnterprisesReform of the European Electricity Market: Lessons from the Nordics, Brussels 2 May
  4. Malta EU 2017Green Light Given for New EU Regulation to Bolster External Border Checks
  5. Counter BalanceCall for EU Commission to Withdraw Support of Trans-Adriatic Pipeline
  6. ACCAEconomic Confidence at Highest Since 2015
  7. European Federation of Allergy and Airways60%-90% of Your Life Is Spent Indoors. How Does Poor Indoor Air Quality Affect You?
  8. European Gaming and Betting AssociationCJEU Confirms Obligation for a Transparent Licensing Process
  9. Nordic Council of MinistersNordic Region and the US: A Time of Warlike Rhetoric and Militarisation?
  10. European Free AllianceEFA MEPs Vote in Favor of European Parliament's Brexit Mandate
  11. Mission of China to the EUXinhua Insight: China to Open up Like Never Before
  12. World VisionViolence Becomes New Normal for Syrian Children

Latest News

  1. Russische schwarze Kassen bedrohen EU Demokratie
  2. Libya commanders in Brussels for migration talks
  3. Mixed review for EU asylum spots in Greece and Italy
  4. France still anxious over possibility of Le Pen win
  5. Free wifi plan backed by MEP committee
  6. Report: Germany blocks post-Dieselgate reform
  7. Russia suspected of Macron hack
  8. EU to exclude financial services from post-Brexit deal