“European policy makers are shifting focus from a financial crisis to an economic-growth crisis.
“We are now back in a normal situation from a financial viewpoint, but we are not at all seeing an early and strong recovery,” European Central Bank President Mario Draghi said yesterday. Luxembourg Prime Minister Jean-Claude Juncker, who leads euro-area finance ministers, echoed that by saying, “the worst is over, but what we still have to do is difficult.”
As the Euro Stoxx 50 (SX5P) posts its best start to a year since 2003 and bond yields fromGreece to Spain recede from euro-era highs, markets are endorsing last year’s ECB-led rescue efforts and rebutting warnings of an imminent euro breakup. The next test for authorities will come if the economic slump reignites investor doubts about cash-strapped governments.
The ECB “may be unhappy with the current economic situation of the euro zone, but optimism about the future is growing,” said Christian Schulz, a former ECB official and now an economist at Berenberg Bank in London.
The central bank yesterday held off doling out more recession-fighting medicine, keeping its benchmark interest rate at 0.75 percent in a unanimous decision a month after calls for a cut from some of its Governing Council. It maintained its so- far untapped offer to buy the bonds of sovereigns acquiescing to reform demands and will hand banks further cheap long-term funding….”
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