Draghi says eurozone not past turning point yet

FRANKFURT — European Central Bank president Mario Draghi said the eurozone’s struggling economy is showing signs of improvement and should grow modestly by the end of 2013, but it is not yet out of the danger zone as it struggles with a recession and too much debt.

The group of 17 European Union countries that use the euro will recover gradually later­ this year, he said — if governments get moving on making their economies more business-friendly.

Draghi spoke after the bank’s 23-member governing council left its key interest rate unchanged at a record low of 0.75 percent.


The ECB chief ticked off a list of improvements in the eurozone’s battle to overcome its financial and economic crisis to back up his forecast that the eurozone is beginning the path to recovery. They included lower bond market borrowing costs for governments, rising stock markets, and a flow of deposits back into banks in the most troubled countries.

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Despite positive leading indicators, the eurozone is producing horrible numbers. The economy of the 17-country group is in recession, defined as two quarters in a row of negative growth. Meanwhile, unemployment, which usually rises after a downturn and falls only after the recovery is under way, hit a record high of 11.8 percent for November. Some countries are faring even worse: Bailed-out Greece, for instance, is stuck in a deep recession with a 26.8 percent unemployment rate.

Following the ECB’s monthly policy meeting, Draghi told reporters that it is now up to governments to get their economies growing.

While governments have cut spending to control their debts, they have been slower to bring in longer-term structural reforms. Those include ending two-tier labor markets, in which older workers have strong protections but companies are reluctant to hire young ones because they can’t shed workers in a downturn.

Associated Press