Mario Draghi, the E.C.B. president, cautioned that, “We haven’t gotten out of the crisis yet.” But he told Europe 1 radio in Paris, “The recovery for the entire euro zone will no doubt begin in the second half of 2013.”
That was a firmer forecast than Mr. Draghi gave earlier last month, when he said only that growth next year would be weak. And it came as separate data indicated that inflation continued to fall, giving the E.C.B. more leeway to pump cash into the economy if needed.
Mr. Draghi’s statement, along with tentative indications that countries like Spain and Portugal are getting a grip on their economic problems, held out hope that a turning point in the euro zone crisis might be on the distant horizon.
“Clear progress is visible in the dismantling of economic imbalances in the euro zone,” economists at the German insurer Allianz said in a note Friday. “The reforms are bearing their first fruits.”
To be sure, many economists remain skeptical. And Mr. Draghi used a separate appearance in Paris on Friday to deliver a lecture on economic competitiveness that, given the setting, could be read as a warning to France, the second-largest economy in the euro zone, after Germany. The country is seen as a risk because of rigid labor regulations and other rules that critics say suppress entrepreneurship.
“It is indeed of utmost importance that national policies continue to focus not only on fiscal measures,” Mr. Draghi said, “but at the same time address key structural problems in labor and product markets.”
Mr. Draghi acknowledged that austerity measures by various governments would inevitably bring “a short-term contraction in economic activity.” But he repeated the central bank’s vow to do “everything necessary” to maintain stability in the euro zone. The central bank has promised to buy debt from countries like Spain in any amount necessary to hold down their borrowing costs, provided they agree to conditions.
The E.C.B. gained a little more maneuvering room for measures to combat the crisis after another report said that inflation in the euro zone declined to 2.2 percent in November from 2.5 percent in October. The E.C.B. seeks to hold inflation to about 2 percent. The falling inflation rate should help mute complaints from the Bundesbank, Germany’s central bank, that E.C.B. measures pose a risk to price stability.
Lower inflation would also make it easier for the E.C.B. to cut its main interest rate, which already stands at a record low of 0.75 percent. But most analysts do not expect a cut next week when the bank holds its monthly monetary policy meeting.
The labor market report Friday underlined the grave effect that the euro zone crisis had had on European society. The jobless rate in the euro zone rose to 11.7 percent in October, breaking the previous record in September of 11.6 percent, the official Eurostat statistical agency reported from Luxembourg.
The jobs market tends to react to underlying economic trends with a time lag, so the rise was not necessarily inconsistent with Mr. Draghi’s prediction of a turnaround next year.
Still, that was probably little consolation to the 18.7 million people in the euro zone who have been classified as jobless.
Spain, struggling with collapse of its real estate sector and painful austerity measures, again led all 27 European Union countries, with a 26.2 percent jobless rate. Greece was in second place with a 25.4 percent rate in August, the latest month for which data were available.
Austria’s 4.3 percent rate was the lowest.
For youth, the unemployment picture was even worse: 23.9 percent of people under 25 in the euro zone are currently defined as unemployed, Eurostat said.
For the entire 27-nation European Union, Eurostat said, the unemployment rate rose to 10.7 percent in October from 10.6 percent a month earlier.
Article source: http://www.nytimes.com/2012/12/01/business/global/daily-euro-zone-watch.html?partner=rss&emc=rss