The President of the European Central Bank (ECB), Mario Draghi, said on Friday that the eurozone crisis is not yet over and that it will be late next year until the EU economy begins to show signs of improvement.
Draghi said “short-term fiscal consolidation is inevitable” but stressed that “economic recovery will start certainly in the second half of 2013″.
The eurozone is in technical recession, after registering a quarter-on-quarter contraction of 0.1% of the GDP in the third quarter, and 0.2% in the second quarter. Compared to the same period last year, the EU GDP fell by 0.6% between July and September, after falling 0.4% year-on-year between April and June.
Draghi said he believes that the economic contraction was “inevitable” due to the problems related to sovereign debt, but that it should serve as a basis on which to build a more stable economy when the effects of the structural reforms take hold.
In this regard, Draghi reiterated that the ECB is ready to implement their new outright monetary transactions programme (OMT), to buy sovereign debt, in order to continue lowering market pressures over the financing capacity of the Member States of the eurozone.
The ECB President also returned to defend the single banking supervisory mechanism for European countries that share the single currency, which the ECB would be in charge of, saying that they will do “everything necessary” to stabilise the economy of the eurozone. In this sense, he described as “positive”, the progress that has been made in resolving the plight of Greece, which has reached an agreement with the IMF and Brussels to reduce its debt by 40,000 million euros.
El Economista reported that in a statement to French radio station, Europe 1, after Moody’s downgraded France from the highest credit rating, the ECB President said that “the loss of the ‘triple A’ is a signal to Governments that must be taken seriously”.