EU not past turning point: Draghi

FRANKFURT, Germany (AP) — European Central Bank President Mario Draghi says the euro area’s struggling economy is showing early signs of improvement and should grow modestly by the end of 2013 but it is not out of the danger zone yet as it struggles with recession and too much debt.

The group of 17 European Union countries that use the euro will recover gradually later this year, he said — if governments get moving on making their economies more business-friendly.

Draghi spoke after the bank’s 23-member governing council left its key interest rate unchanged at a record low of 0.75 percent. The ECB chief ticked off a list of improvements in the eurozone’s battle to overcome its financial and economic crisis to back up his forecast that the eurozone is beginning the path to recovery. They included lower bond market borrowing costs for governments, rising stock markets, and a flow of deposits back into banks in the most troubled countries. The ECB chief also pointed to recent indicators such as polls of purchasing managers and German business executives.

Recent indicators “have broadly stabilized,” although at low levels, he said, and financial markets have steadied. “Economic activity should gradually recover” later this year, he said.

But, he added, “to define a turning point you need a lot of things beside financial market stabilization.”

For that, the eurozone needs “greater strength in the economy,” he said.

Despite positive leading indicators, the eurozone is producing horrible numbers. The economy of the 17-country group is in recession, defined as two quarters in a row of negative growth. Meanwhile, unemployment, which usually rises in the wake of a downturn and only falls after the recovery is under way, hit a record high of 11.8 percent for November. Some countries, such as bailed-out Greece, are faring even worse, stuck in a deep recession with 26.8 percent unemployment rate. Joblessness.

Draghi told reporters following the ECB’s monthly policy-setting meeting that it was now up to governments to get their economies growing. The chief risk to the expected recovery is “slow implementation of structural reforms in the euro area.”

While governments have cut spending to control their debts, they have been slower to bring in longer-term structural reforms. Those include ending two-tier labor markets where older workers have strong protections but companies are reluctant to hire young ones because they can’t shed workers in a downturn.