By Lisa Jucca
DAVOS, Switzerland Jan 25 The "positive
contagion" on financial markets is not yet feeding into the
economy at large but the euro zone should see recovery in the
second half of the year, ECB President Mario Draghi said on
Speaking at the World Economic Forum, Draghi said that the
central bank's loose monetary policy was helping the euro zone
return to growth, but that much remained to be done.
"The level of economic activity is in the process of
stabilising at very low levels ... We see a recovery in the
second half of the year," Draghi said in Davos. "All the indices
point to substantial improvement of financing conditions."
But Draghi tempered any thoughts of normalisation, saying
that the economy at large was still troubled.
"It is a situation where you have positive contagion on the
financial markets and for the financial variables, but we don't
see this transmitted to the real economy yet."
Even Germany, euro zone's economic powerhouse, has seen the
debt crisis bite, with first estimates of a 0.5 percent Gross
Domestic Product (GDP) contraction in the fourth quarter of last
However, Draghi said that this year had begun on a better
note than last.
"All in all, the background is more favourable than it was
at the same time last year."
For 2013, the number one objective was to overcome financial
market fragmentation, the Italian said.
Doubts over the health of public finances and banks in
several countries has led to large differences in lending rates
across the union, with healthy northern countries seeing
record-low rates while consumers in southern Europe face much
Draghi noted the positive impact of the central bank's
announcement of its new OMT programme to buy government bonds of
indebted countries. It has helped removed worst fears of the
common currency area falling apart.
But the central bank will not be satisfied before the real
economy is also aided by central bank actions, Draghi added.
"At the end of July, we announced the OMT programme, which
turned out to be very helpful in removing the tail risk for the
euro as such," Draghi said.
"Are we satisfied with that? I think, to say the least, the
jury is still out, because all in all we have not seen equal
momentum on the real side of economy, and that's where we have
to do much more."