Euro recession seen longest in single currency era

ECB Action

ECB President Mario Draghi predicted a “gradual recovery” later this year even though risks “are on the downside.”

The Frankfurt-based central bank is considering buying asset-backed securities among other options to support lending to small and medium-sized companies, Draghi said on May 12. He predicts the euro economy will shrink 0.5% this year before growing 1% in 2014.

“The pace of the recession may be easing but I don’t see a real recovery yet,” said Martin van Vliet, senior euro-area economist at ING Bank NV in Amsterdam. “We can’t be sure the worst is behind us before job growth returns.”

The euro area’s jobless rate rose to a record 12.1% in March, with 19.2 million people out of work and youth unemployment at 24%. In France, the number of people actively looking for work reached a record 3.225 million.

‘Adjustment Fatigue’

“Our people, they feel that there is something of an adjustment fatigue,” Moscovici told Bloomberg Television. “They want jobs, jobs, jobs.”

While the jobless rate in Germany is close to a two-decade low and rising wages are boosting consumption, unemployment in Spain is the highest since at least 1976.

“Economic improvement in the euro area is coming only very slowly and high unemployment drags on,” said Evelyn Herrmann, an economist at BNP Paribas SA in London. “In the end, countries will have to boost potential output for a long-term growth perspective, and that needs adjustment and structural reforms.”

Bloomberg News

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