Euro zone needs growth and fiscal discipline, Draghi says

Thu May 3, 2012 9:46am EDT
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By Paul Day and Marc Jones

BARCELONA, Spain (Reuters) - European Central Bank President Mario Draghi, reflecting growing anxiety among Europeans about their economic plight, said on Thursday growth should be at the heart of euro zone policy but it needed to go hand in hand with fiscal austerity.

At a news conference in Spain, one of the countries worst hit by the bloc's debt crisis, Draghi painted an uncertain picture of the euro zone's economy, saying while it was likely to improve this year there were risks of decline.

Such weakness should keep a lid on inflation over time, he said, even though it would remain above 2 percent this year in the 17-nation currency area.

"The economic outlook continues to be subject to downside risks," he told a news conference in Barcelona, shortly after the bank held interest rates at a record low of 1.0 percent.

"There are indications that global recovery is proceeding ... We continue to expect the euro area economy to recover gradually during the course of the year."

Police mounted a heavy presence outside the Barcelona hotel where ECB policymakers were meeting, wary of protests expected against Spanish government spending cuts that are supported by the ECB.

Draghi said there was "absolutely no contradiction" between pursuing a growth pact and pushing ahead with Europe's already-agreed pact on budget discipline.

"I certainly agree with your question when you say we have to put growth back at the centre of the agenda, without any contradiction with the need to continue, persevere in fiscal consolidation," Draghi said.   Continued...

A huge Euro logo is pictured past the headquarters of the European Central Bank (ECB) in Frankfurt, September 29, 2011. REUTERS/Ralph Orlowski