European Central Bank President Mario Draghi said economic indicators signal the euro region is past the worst of its longest-ever recession, while reiterating that interest rates will stay low for the foreseeable future.
"Confidence indicators have shown some further improvement from low levels and tentatively confirm the expectation of a stabilization in economic activity," Draghi said at a press conference in Frankfurt today after the ECB kept its benchmark rate at 0.5 percent. "The Governing Council confirms that it expects the key ECB interest rates to remain at present or lower levels for an extended period of time."
Draghi said that even as the economy improves, money-market prices signaling that rates will rise are "unwarranted." The ECB head is trying to assure investors that the central bank won't tighten policy too soon, as it did in 2011. While euro-area manufacturing expanded for the first time in two years in July and business confidence improved for a third month, lending to companies and households fell the most on record in June.
David Fuller's view Europe is very fortunate to have Mario Draghi as President of the ECB. I maintain that he is easily one of the most economically and politically savvy central bankers of this era.
In addition to steering the EU towards a tentative economic recovery, which is no small achievement under the circumstances, Mr Draghi may have also prevented a disorderly break-up of the single currency during the worst of the crisis. Euroland's long-term future is far from assured but at least any future changes in membership, should they occur, can do so in a somewhat more stable environment.
As for the longer term, Euroland's perennial problem of sporadic GDP growth has yet to be resolved. This needs to be addressed by economically astute political leaders, preferably working in cooperation.