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25th Jul 2021

ECB chief 'not enthusiastic' about eurozone growth

  • The ECB is still prepared to lower interest rates under 0.5 percent (Photo: Valentina Pop)

The European Central Bank (ECB) on Thursday (5 September) decided to keep its interest key interest unchanged, despite data showing the eurozone economy out of recession for the first time in 18 months.

It said the rate will stay at 0.5 percent and suggested it may lower it still in the coming months.

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"I am very, very cautious about the recovery, I can't share the enthusiasm. These shoots are still very, very green," ECB chief Mario Draghi said at the bank's monthly press conference in Frankfurt.

He mentioned statistics published one day earlier showing the eurozone economy is growing for the first time since mid-2011, albeit by a timid 0.3 percent in the second quarter compared to the first three months of 2013.

With oil prices expected to go up due to the Syrian crisis and with most euro-countries still struggling with deficit, debt and unemployment, the ECB will continue its low-rate policy "for an extended period of time," Draghi noted.

The ECB upgraded its projection for the eurozone economy this year, saying it will only shrink by 0.4 percent compared to a 0.6 contraction predicted in June.

Next year, the eurozone is expected to grow by one percent, compared to 1.1 percent projected three months ago.

Rules for bank test next month

Meanwhile, the ECB and national bank supervisors are working on a set of rules on what data to include in an in-depth review of the balance sheets and assets of eurozone's largest banks.

The test is a precondition for the ECB to take on supervision over these banks.

Draghi said the set of rules will be published by 15 October.

"This is very important for banks, because they want to know how this review will be carried out," he noted.

He added there will be "positive news in the coming days" about the ongoing negotiations with the European Parliament on the Single Supervisory Mechanism.

Eurozone economy still in troubled waters

The eurozone economy grew by a meagre 0.1 percent in the last three months, showing that optimism on recovery from the crisis may be premature.

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