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| European Central Bank Chief Tamps Down Optimism | European Central Bank Chief Tamps Down Optimism |
| (about 4 hours later) | |
| FRANKFURT — The president of the European Central Bank issued a sober assessment of the euro zone economy, saying on Thursday that he was “very, very cautious” about prospects for growth and acknowledging concern about shock waves from the civil war in Syria. | FRANKFURT — The president of the European Central Bank issued a sober assessment of the euro zone economy, saying on Thursday that he was “very, very cautious” about prospects for growth and acknowledging concern about shock waves from the civil war in Syria. |
| “I can’t share the enthusiasm” about budding growth in the euro zone, Mario Draghi, the bank president, said at his monthly news conference. “These shoots are still very, very green.” | “I can’t share the enthusiasm” about budding growth in the euro zone, Mario Draghi, the bank president, said at his monthly news conference. “These shoots are still very, very green.” |
| The central bank kept its benchmark interest rate at a record low of 0.5 percent on Thursday, which had been expected after recent economic indicators showed the euro zone economy was beginning to recover, albeit weakly. But Mr. Draghi said the bank had not ruled out future rate cuts. | The central bank kept its benchmark interest rate at a record low of 0.5 percent on Thursday, which had been expected after recent economic indicators showed the euro zone economy was beginning to recover, albeit weakly. But Mr. Draghi said the bank had not ruled out future rate cuts. |
| “We certainly are alert to the geopolitical risks that may come from the Syrian situation,” he added. | “We certainly are alert to the geopolitical risks that may come from the Syrian situation,” he added. |
| Mr. Draghi’s remarks were unexpectedly pessimistic and could dampen the hopes of some economists and political leaders that the euro zone is finally improving after a stubborn recession that has pushed unemployment to more than 25 percent in Spain and Greece. | |
| The central bank also revised its forecast for euro zone growth in 2014 to 1 percent from 1.1 percent. | The central bank also revised its forecast for euro zone growth in 2014 to 1 percent from 1.1 percent. |
| The bank may not welcome undue optimism about the euro zone economy because it could cause market interest rates to rise and make credit even more unaffordable for the businesses and households in Southern Europe that need it most. | The bank may not welcome undue optimism about the euro zone economy because it could cause market interest rates to rise and make credit even more unaffordable for the businesses and households in Southern Europe that need it most. |
| “Mr. Draghi believes investors are jumping the gun on the state of the euro zone economy and is providing a reality check in an effort to talk down market rates,” Nicholas Spiro, managing director of Spiro Sovereign Strategy, said by e-mail. | “Mr. Draghi believes investors are jumping the gun on the state of the euro zone economy and is providing a reality check in an effort to talk down market rates,” Nicholas Spiro, managing director of Spiro Sovereign Strategy, said by e-mail. |
| European stocks rose and the dollar reached a six-week high against the euro while Mr. Draghi spoke, as investors took his words as a sign the bank would keep interest rates low. | European stocks rose and the dollar reached a six-week high against the euro while Mr. Draghi spoke, as investors took his words as a sign the bank would keep interest rates low. |
| On Thursday in Britain, which does not use the euro currency, the Bank of England also held interest rates at a record low, as policy makers there, too, were reluctant to celebrate tentative signs of an economic recovery. | On Thursday in Britain, which does not use the euro currency, the Bank of England also held interest rates at a record low, as policy makers there, too, were reluctant to celebrate tentative signs of an economic recovery. |
| Mr. Draghi indicated that the bank’s Governing Council, which held its monthly monetary policy meeting on Thursday, had not ruled out further cuts in the benchmark interest rate. During the debate on Thursday, he said, some members argued against a cut because of signs of better growth, while others noted that growth remained tentative. | Mr. Draghi indicated that the bank’s Governing Council, which held its monthly monetary policy meeting on Thursday, had not ruled out further cuts in the benchmark interest rate. During the debate on Thursday, he said, some members argued against a cut because of signs of better growth, while others noted that growth remained tentative. |
| Some analysts agreed that it was too soon for optimism about the euro zone economy. | Some analysts agreed that it was too soon for optimism about the euro zone economy. |
| The European Central Bank’s outlook showed “caution that we think is warranted,” Marie Diron, an economist who advises the consulting firm Ernst & Young, wrote by e-mail. | The European Central Bank’s outlook showed “caution that we think is warranted,” Marie Diron, an economist who advises the consulting firm Ernst & Young, wrote by e-mail. |
| According to official European Union data, the euro zone grew at an annualized rate of 1.2 percent in the second quarter of 2013, ending a recession that began in mid-2011. | According to official European Union data, the euro zone grew at an annualized rate of 1.2 percent in the second quarter of 2013, ending a recession that began in mid-2011. |
| But the economic recovery has been mostly confined to Germany and a few other countries like Finland and Austria, and even there, signals are mixed. German factory orders fell more than expected in July, figures released on Thursday show. | But the economic recovery has been mostly confined to Germany and a few other countries like Finland and Austria, and even there, signals are mixed. German factory orders fell more than expected in July, figures released on Thursday show. |
| Unemployment has leveled off in the euro zone as a whole, as well as in some of the most troubled countries like Spain, where the number of jobless people declined slightly in August. But unemployment rose in the second quarter in France, to 10.5 percent from 10.4 percent, according to figures released on Thursday, a further sign of an uncertain recovery. | Unemployment has leveled off in the euro zone as a whole, as well as in some of the most troubled countries like Spain, where the number of jobless people declined slightly in August. But unemployment rose in the second quarter in France, to 10.5 percent from 10.4 percent, according to figures released on Thursday, a further sign of an uncertain recovery. |
| Bank lending, which is usually considered a precondition for economic growth, continues to decline. Especially in countries like Italy and Spain, many companies are caught in a vicious circle where they need credit to expand but are not making enough money to qualify for loans. | Bank lending, which is usually considered a precondition for economic growth, continues to decline. Especially in countries like Italy and Spain, many companies are caught in a vicious circle where they need credit to expand but are not making enough money to qualify for loans. |
| “Without credit, there is not going to be any growth,” Jörg Zeuner, chief economist at KfW Banking Group, a development bank owned by the German government, said Thursday. “Without business prospects, there is not going to be a lot of credit demand.” | “Without credit, there is not going to be any growth,” Jörg Zeuner, chief economist at KfW Banking Group, a development bank owned by the German government, said Thursday. “Without business prospects, there is not going to be a lot of credit demand.” |