ECB cuts growth outlook for eurozone, holds rates

FRANKFURT — The European Central Bank warned of another gloomy year for the 17 European Union countries that use the euro, cutting its forecast for economic growth in 2013 from plus 0.5 percent to minus 0.3 percent.

Even so, the bank left rates unchanged at its meeting Thursday, and ECB head Mario Draghi gave little sign he was leaning toward any more cuts to stimulate growth.

The bank’s 22-member governing council kept its benchmark refinancing rate unchanged at 0.75 percent. The rate determines what private sector banks are charged for borrowing from the ECB, and, through that, the rates banks set for businesses and consumers.


Draghi saw ‘‘downside risk to the economic outlook’’ and said that ‘‘weak activity is expected to extend into next year,’’ with a gradual recovery later in 2013. The bank’s minus 0.3 percent outlook is the midpoint of the forecast rate of between minus 0.9 percent and plus 0.3 percent.

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The ECB’s revised forecasts come as the eurozone’s economy is caught in a recession — having shrunk 0.1 percent in the third quarter after a 0.2 percent fall in the previous three months. It is expected to contract again in the last three months of the year. A recession is often defined as two consecutive quarters of negative growth.

Growth is being held back across the eurozone as governments slash spending and raise taxes. Countries are trying to reduce debt piled up from overspending, in the case of Greece, or from real estate bubbles and banking crises in Spain and Ireland. Greece, Portugal, Ireland, and tiny Cyprus have already needed bailouts, while Italy and Spain, the eurozone’s third- and fourth-largest economies, teetered on the edge of needing help this summer.

Analysts saw the slashed forecasts as confirmation of more tough times to come for the eurozone.

‘‘This is something that we have been flagging for some time, namely that the eurozone may be headed for a ‘lost decade,’ ’’ said Marie Diron, a senior economic adviser at Ernst & Young.


European share indexes held onto gains after the speech, with the London FTSE up 0.3 percent and Germany’s DAX up 1.11 percent. The euro dipped 0.8 percent to $1.2967 as some investors thought the dismal outlook raised the chance of a rate cut. Lower rates can make a currency less attractive by lowering returns on interest-bearing investments.

The ECB’s measures are only slowing making themselves felt in the eurozone’s wider economy. Some business confidence indicators are beginning to rise and the supply of money in the economy is increasing. But consumer spending sagged 1.2 percent in October, indicating fear and reluctance remain strong.