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# Recession
ECB’s Draghi: eurozone may re-enter recession next year
Mario Draghi says the ECB has lowered its expected rates of economic growth – contemplating negative growth in 2012.
EUROPEAN CENTRAL BANK president Mario Draghi has said that the bank has downgraded its expectations for economic growth next year – indicating the bank is expecting the eurozone to fall into recession once more.
Speaking in Frankfurt after this morning’s meeting of the bank’s governing council, Draghi said the bank was expecting eurozone economic growth to be between -0.4 per cent and 1.0 per cent next year – down from between 0.4 and 2.2 per cent next year.
The possibility of a shrinking eurozone economy is bad news for Ireland, where domestic demand has continued to lag – and may be further hit by the forthcoming 2 per cent increase in VAT.
Draghi told reporters that he also expected inflation in the eurozone to be somewhere between 1.5 and 2.5 per cent next year, driven by increases in the price of oil and in other indirect taxes.
The Italian, who has now presided over two reductions in the ECB’s main interest rate in as many months, was reluctant to be drawn into the debate about whether the bank’s role in fighting the European crisis could be expanded.
“I don’t want to enter this field, which is the competence of the leaders,” he said.
He did, however, indicate that the ECB should not be tapped simply to finance the spending of its member states.
Asked whether he supported the notion of the ECB creating new cash to lend to the IMF – which could, in turn, be lent to struggling states – Draghi merely said that the ECB was not a member of the IMF, and that this may present a fundamental problem.
Draghi had earlier revealed that the bank would begin a programme of new three-year loans to financial institutions – a drastic change, considering that bank loans are currently limited to one-year terms.
The ECB will issue these three-year loans later this month, and will relax its current rules on collateral to make those loans easier to access for member banks.
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