President of the European Central Bank says eurozone has 'turned a corner' and forecasts regional growth by end of 2013
Mario Draghi sent the euro surging on Thursday by declaring "positive contagion" was helping to drag the eurozone out of its crisis. The president of the European Central Bank said he was confident that a gradual recovery would begin in the euro region this year.
After the ECB voted to leave interest rates unchanged, he told reporters Europe had turned a corner in the crisis, with borrowing costs across the eurozone now "significantly lower". "Stock markets have increased. Volatility is at a historical minimum," said Draghi at the ECB's monthly press conference in Frankfurt. "We have seen strong capital inflows in the euro area."
European commission president José Manuel Barroso was also in ebullient mood. On a visit to Dublin, he announced that "the doomsday scenario of a break of the euro has not come to pass".
Fresh economic data from Greece, though, showed the European periphery was still suffering. The Greek jobless rate rose to a record high of 26.8% in October, with 36,219 people losing their jobs during the month. Youth unemployment hit 56.6%, having almost doubled over the last three years.
With Spain selling bonds at much lower interest rates than last year, Draghi's comments helped to bolster confidence in the City. The euro jumped almost two cents against the dollar to $1.326 after Draghi insisted that the ECB's governing council was unanimous in leaving borrowing costs unchanged – matching the Bank of England's own decision earlier in the day.
In a sign of how the situation in the eurozone has calmed, Draghi even fielded a question on whether there was too much exuberance in European markets, where the FTSE 100 closed at a four-and-a-half-year high. Draghi denied that excessive exuberance was a big threat, arguing that Europe had simply returned to normality.
"We spoke a lot about contagion when things go poorly but I believe there is a positive contagion when things go well. And I think that's also what is in play now. There is a positive contagion," insisted the man credited with saving the eurozone last summer by promising an unlimited bond buying programme that has yet to be activated.
Draghi cautioned that Europe still faced "downside" risks, but refused to be blamed for the eurozone's record unemployment levels - which he partly attributed to 'structural' problems beyond his remit.
Kit Juckes, global macro strategist at Société Générale, believes the ECB president is now 'passing the baton' to Europe's elected leaders.
"Super Mario sounded like a man who thinks the job is done, battle won, time to rest. Superhero departs, leaving unemployed to politicians," Juckes said.
The economic data from Greece showed that women are the worst hit by Greece's long recession, with over 30% out of work.
Elsewhere in the eurocrisis, Cyprus hit back at German MPs who are refusing to support its bailout because of money-laundering concerns. Government spokesman Stefanos Stefanou said Cypriot banks were the victims of Europe's decision to demand a haircut on Greek debt, which left them nursing losses of over €10bn.
"What we are asking for is an expression of solidarity, which is a basic EU principle, towards a country which is the victim of a European decision to restructure Greek debt," Stefanou said.
Nicos Anastasiades, the right-wing front runner to win next month's elections in Cyprus, said he was keen to implement an economic reform plan. However Anastasiades also indicated he would not prioritise the privatisations of state assets - a key demand of international lenders.
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