ECB chief Draghi warns of substantial downside risks to economy

15 December 2011 18:49  [Source: ICIS news]

LONDON (ICIS)--The economic outlook for the eurozone “remains subject to high uncertainty and substantial downside risks”, the president of the European Central Bank (ECB) said on Thursday.

Despite the decisions taken by the European Council summit last week to address the eurozone government debt situation, “the crisis has not ended yet”, Mario Draghi said at an economics forum in Berlin.

“It is now important not to lose momentum and to swiftly implement all those decisions that have been taken [at the summit] to put the euro area economy back on course,” he said.

Draghi also noted that responsibility for turning things around remained with the indebted eurozone member countries.

“They have to put their policies back on a sound footing,” he said.

“I believe that they are now on the right track and they are right in implementing budgetary consolidation resolutely,” he added.

In the medium term, sustainable growth can be achieved only by undertaking deep structural reforms that have been put off for too long, he said.

Restoring financial markets’ confidence requires that investors be reassured that government debt will always be repaid and timely serviced, he added.

But Draghi also said when looked at as a whole, the eurozone government finance situation compared favourably with the US, the UK and Japan.

In 2012, the eurozone as a whole will have “a government primary budget deficit close to zero”, compared with projected deficits at around 5% of GDP in Japan, the UK and the US, he said.

Meanwhile, in the US, trade group American Chemistry Council (ACC) warned that the recovery in the US would be slowed by a developing recession in Europe and that region's debt crisis.

Additional reporting by Joe Kamalick and Bobbie Clark

Read Paul Hodges’ Chemicals and the Economy Blog

By: Stefan Baumgarten
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