“European Central Bank President Mario Draghi said ECB policies and governance reforms in the euro area have revived confidence that will help foster a gradual economic recovery in the second half of next year.
A commitment in July to preserve the euro at any cost and the establishment of a single banking supervisor have improved financial-market sentiment, Draghi said in Brussels yesterday. One priority for 2013 is now to create a single resolution mechanism to complete Europe’s banking union, he said.
“The impression that one has of this year, at least of the second part of this year, is of a gradual improvement in financing conditions which is one of the reasons why we foresee a beginning of a recovery in the second part of next year,” Draghi said in testimony at the European Parliament’s Economic and Monetary Affairs Committee. Still, “the medium-term outlook for economic activity remains challenging.”
The Frankfurt-based ECB cut its economic forecasts earlier this month, predicting the 17-nation region will contract 0.5 percent this year and 0.3 percent in 2013. The Governing Council kept its benchmark interest rate at a record low of 0.75 percent, even though a majority of policy makers were open to easing borrowing costs, according to three officials speaking on condition of anonymity.
ECB Executive Board member Yves Mersch told German newspaper Frankfurter Allgemeine Zeitung in an interview to be published today that he doesn’t “quite understand” the discussion about lower interest rates because non-standard measures have become the primary policy tools….”
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