DAVOS – The President of the European Central Bank admits the renewed calm in the euro area's financial markets has yet to be reflected in the wider European economy. Mario Draghi said Friday at the World Economic Forum that markets for stocks, bonds and bank credit have “a new, restored sense of tranquility (and) positive contagion on the financial markets” and forecast a recovery in the eurozone economy in the second half of the year. But he added that “we don't see this being transmitted into the real economy yet.” Draghi said governments need to move on structural reforms to make their economies grow faster, which will help reduce government debt. He said that once that's achieved, the stimulus from the ECB's low interest rates and easy credit to banks “should find its way through to the economy and we will see a recovery in the second half of the year.” Moreover, he said the embattled euro had been relaunched but that more had to be done to boost the eurozone's recession-wracked economy. Draghi also said that austerity measures being taken in crisis-hit countries were “unavoidable” despite the impact on growth. “If one has to find a common denominator... for defining why 2012 is going to be remembered, I think one would say it's the year of the relaunching of the euro,” Draghi said in his well-attended and hotly anticipated speech. Draghi outlined three “extraordinary” steps taken by European leaders and institutions to battle the three-year sovereign debt crisis that has pitched the 17-nation bloc into recession. Governments have pushed through structural reforms with “urgency” and these are “now bearing fruit,” said the ECB boss. European leaders had recognized structural flaws inherent in the single currency and were now pushing for greater integration. And finally, his own institution had undertaken actions that broke the monetary policy mold, including providing one trillion euros ($1.33 trillion) in liquidity for banks. – AP
