President of the European Central Bank and champion of the Euro, Mario Draghi, sent the single currency surging in the markets by declaring ‘positive contagion’ was dragging the Eurozone out of its year’s long crisis. His comments come just a day after the region posted a new record high level of unemployment so…
Draghi told reporters that he was confident that the Eurozone will begin to show signs of a gradual recovery before the end of 2013 and said that the he believed that Europe had turned a corner in the crisis, with borrowing costs across the region being ‘significantly lower’ than last year.
“Stock markets have increased. Volatility is at a historical minimum,” said Draghi at the ECB’s monthly press conference in Frankfurt. “We have seen strong capital inflows in the euro area.”
The Eurozone leader’s strategy of talking up the currency was joined by European Commission president Jose Manuel Barroso. On a visit to Ireland he announced that the ‘the doomsday scenario of a break of the Euro has not come to pass.” He forgot to say yet. They can talk all the positivity they want but the fact remains that once prosperous nations are struggling to survive.
Fresh economic data from Greece, though, showed the European periphery was still suffering. The Greek jobless rate rose to a record high of 26.8% in October, with 36,219 people losing their jobs during the month. Youth unemployment hit 56.6%, having almost doubled over the last three years.
The picture as a whole does however seem to have improved with talk that the Euro could collapse at any moment being a weekly rather than a daily topic in the worlds press. With Spain selling bonds at much lower interest rates than last year, Draghi’s comments helped to bolster confidence in the City.
The Euro jumped almost two cents against the Dollar to $1.326 after Draghi insisted that the ECB’s governing council was unanimous in leaving borrowing costs unchanged, matching the Bank of England’s own decision earlier in the day. The stock markets have also strengthened in recent days with the FTSE 100 closing at its highest level in four years.
“We spoke a lot about contagion when things go poorly but I believe there is a positive contagion when things go well. And I think that’s also what is in play now. There is a positive contagion,” insisted Dragi, the man credited with saving the Eurozone last summer by promising an unlimited bond buying programme that has yet to be activated.
Draghi did warn that Europe still faced risks but refused to take the blame for the Eurozone’s record unemployment which he blamed on problems outside of his remit. In a lot of ways he is right to do so. The weakness of Europe’s politicians has been the main cause for the Eurocrisis lasting so long. Their dithering and infighting over issues ensured that the crisis dragged on. Now it is up to the politicians to finally put an end to the crisis.
The Pound to Euro exchange rate is currently trading at 1.2139
The Pound to US Dollar exchange rate is currently trading at 1.6113
The Pound to Australian Dollar exchange rate is currently trading at 1.5250
The Euro to US Dollar exchange rate is currently trading at 1.3272
The Euro to Pound exchange rate is currently trading at 0.8237
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