ECB president bullish
BERLIN — EUROPEAN Central Bank (ECB) President Mario Draghi struck a bullish tone on the eurozone debt crisis yesterday, despite fresh concerns over Spain and Greece and worrying economic signs from Germany.
In a speech to business leaders in Berlin, Draghi defended the ECB's recent actions to shore up the eurozone that have come under fire especially in Germany and said there were grounds for optimism that the crisis was gradually easing.
"The first question that comes to mind for all of us is the following: 'Are there signs for optimism?' Can we be confident that at some point this crisis will somewhat subside?" Draghi asked.
"My firm belief and central message to you today is that— provided all policymakers persevere with the necessary reforms — we have a number of reasons to be positive about where the euro area is heading."
He said there were "signs of improved sentiment in financial markets" and added the ECB expected the bloc to return to growth in 2013.
"At the same time, considerable progress is being made on all fronts to strengthen the foundations of the euro area," he said, noting several member states were taking "determined measures" to reform their economies.
However, even as Draghi was making his pitch in Berlin, hundreds of protesters gathered in Madrid to challenge exactly those type of measures the ECB chief was praising.
Adding to the woes of the Spain, the eurozone's fourth largest economy, its most populous region Andalucia is considering seeking ¤5 billion (US$6.5 billion) in rescue funds from the central government, a regional official said.
And borrowing costs for Madrid rose at an auction
of short-term debt earlier yesterday as investors grow weary of waiting to see if the government will resist pressure to quickly seek a full-blown sovereign bailout.
Nor was Draghi's upbeat message from Berlin likely to find much resonance in Athens, the origin of the three-year crisis, where Greek unions prepared to bring the country to a standstill amid warnings of a yawning funding gap.
Civil servants, teachers, lawyers, sailors, and other professionals across the country have been called by their respective unions to a 24-hour walkout today, the third this year against planned new cutbacks.
International Monetary Fund chief Christine Lagarde on Monday warned that the delays in implementing Greece's bailout programme, including privatisations, had expanded the country's financing shortfall.
In a bid to bridge the gap, the finance ministry said that Greek bonds held by the ECB could be rolled over, a subject Draghi declined to broach in his speech.
Moreover, the eurozone gloom was not confined to the periphery of the embattled bloc as signs multiplied that Germany — the continent's top economy and powerhouse — was also feeling the pinch.
Consumer confidence has stagnated, according to a survey by market research firm Gfk, which followed dire news from the corporate sector on Monday, where a closely watched sentiment survey hit its lowest level since February 2010.
The survey, by the Ifo institute, prompted several analysts to predict that the euro crisis would spark recession in Germany, which has proved resilient thus far, and Chancellor Angela Merkel herself urged caution.
"Germany is not an island but as a strong exporting nation... (it) cannot decouple from the developments in the world and European economies," she said at the same event that Draghi addressed.
Draghi and Merkel, arguably the two most influential players in the bid to stem the eurozone crisis, held talks about the best strategy at her office in Berlin and later joined forces to urge greater reform efforts.
"Both agreed that in Europe — on the national level as well as in terms of cooperation within the currency union — significant readiness to reform is still needed to improve competitiveness and restore credibility," Merkel's spokesman said.
The meeting was part of a flurry of hectic shuttle diplomacy following a warning by EU President Herman Van Rompuy that there should
be no let-up in efforts to tackle the crisis.
Merkel was due to meet Lagarde in Berlin today for a closed-doors gathering.
And the finance ministers of three of the most creditworthy eurozone states, Germany, Finland and the Netherlands, met to thrash out the best way to put out the flames that have tipped the bloc into recession.
Following the meeting, German Finance Minister Wolfgang Schaeuble urged patience rather than "speculation" ahead of a hotly awaited report on Greece by its international creditors.