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European Central Bank chief predicts recovery

ECB president Mario Draghi gave a lecture in Paris Friday on economic competitiveness.

Ian Langsdon/EPA

ECB president Mario Draghi gave a lecture in Paris Friday on economic competitiveness.

PARIS — Unemployment in the eurozone rose to a new high in October, according to official data released Friday. But the head of the European Central Bank tempered the bad news by predicting that the region’s economy would begin to recover next year.

ECB president Mario Draghi cautioned that, ‘‘We haven’t gotten out of the crisis yet.’’ But he told Europe 1 radio in Paris, ‘‘The recovery for the entire eurozone will no doubt begin in the second half of 2013.’’

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That was a firmer forecast than Draghi gave earlier last month, when he said only that growth next year would be weak. And it came as separate data indicated that inflation continued to fall, giving the ECB more leeway to pump cash into the economy if needed.

Draghi’s statement, along with tentative indications that countries like Spain and Portugal are getting a grip on their economic problems, held out hope that a turning point in the eurozone crisis might be on the distant horizon.

“Clear progress is visible in the dismantling of economic imbalances in the eurozone,’’ economists at the German insurer Allianz said in a note.

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To be sure, many economists remain skeptical. And Draghi used a separate appearance in Paris on Friday to deliver a lecture on economic competitiveness that, given the setting, could be read as a warning to France, the second-largest economy in the eurozone, after Germany. The country is seen as a risk because of rigid labor regulations and other rules that critics say suppress entrepreneurship.

“It is indeed of utmost importance that national policies continue to focus not only on fiscal measures,’’ Draghi said, ‘‘but at the same time address key structural problems in labor and product markets.’’

Draghi acknowledged that government austerity measures would bring ‘‘a short-term contraction in economic activity,’’ something he said was ‘‘inevitable.’’ And he said again that the central bank was ready to do ‘‘everything necessary’’ to maintain stability in the eurozone. The central bank has promised to buy debt from countries like Spain in any amount necessary to hold down their borrowing costs, provided they agree to conditions.

The ECB gained a little more maneuvering room for measures to combat the crisis after another report said that inflation in the eurozone declined to 2.2 percent in November from 2.5 percent in October. The ECB seeks to hold inflation to about 2 percent. The falling inflation rate should help mute complaints from the Bundesbank, Germany’s central bank, that ECB measures pose a risk to price stability.

Lower inflation would also make it easier for the ECB to cut its main interest rate, which already stands at a record low of 0.75 percent. But most analysts do not expect a cut next week when the bank holds its monthly monetary policy meeting.

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