The Washington Post

Euro zone sees signs of a crisis in retreat

Successful bond auctions in Spain and Ireland this week marked a further defusing of the euro zone’s financial crisis, with Spanish borrowing rates dipping below 5 percent and Ireland steadily regaining trust among investors.

The decline in borrowing costs, even in a nation such as Ireland, which remains under an international bailout program, was cited Thursday by European Central Bank President Mario Draghi as one of a growing set of statistics that indicate a calming of euro-zone tensions.

Deposits have begun returning to banks in the most troubled nations, Draghi said, while capital flight is reversing and stock markets are rising. A closely watched measure of payments owed among the region’s central banks has been falling, a sign that money in the euro zone is starting to stay put rather than flee for the most stable nations.

On Thursday, the ECB left its key interest rate unchanged, reflecting an increasing sense that the acute phase of the crisis has passed and that the risk of a euro-zone breakup has greatly diminished from last year.

“Look at the overall landscape,” Draghi said. “Over the last six months, you see a significant improvement in financial market conditions.”

Greece also reported positive financial news Thursday. Officials said the government in 2012 slightly exceeded its deficit target.

The rates Spain got in its Thursday auction of 10-year bonds are the best since early 2012, according to a dispatch from the El Pais newspaper. The positive showing points to easing tensions within the euro zone and new confidence in the nation’s efforts to trim deficits, boost exports and court international investment.

Likewise, Ireland has steadily regained its footing in international markets and last year became the first of the euro zone’s bailed-out nations to sell longer-term bonds. The Irish sale of about $3 billion in four-year bonds this week attracted requests for as much as $9 billion, indicating that investors trust they will be repaid.

Although financial fears are easing, Draghi said, the 17-nation currency union has not yet entered an economic recovery. The ECB forecasts that the euro zone will likely remain in recession until late this year. Greece and Spain face crushing unemployment, and even the strongest nations are hobbled by slow or no growth.

As the bank held its interest rates at current low levels, Draghi hinted there was not much more the central bank could do — having already set up extensive long-term loans to prop up the banking system — and said the bank was ready to buy government bonds to ensure no euro nation defaults.

It will be up to public officials, he said, to continue restructuring labor, social and other policies in the euro zone to revive growth.

“Structural adjustment is eventually the only thing that matters,” Draghi said. “To regain competitiveness, to create a situation where you don’t have permanent creditors and lots of permanent debtor” nations.



Success! Check your inbox for details. You might also like:

Please enter a valid email address

See all newsletters

Show Comments
Most Read



Success! Check your inbox for details.

See all newsletters

Your Three. Videos curated for you.
Play Videos
What can babies teach students?
Unconventional warfare with a side of ale
A veteran finds healing on a dog sled
Play Videos
A fighter pilot helmet with 360 degrees of sky
Is fencing the answer to brain health?
Scenes from Brazil's Carajás Railway
Play Videos
How a hacker group came to Washington
The woman behind the Nats’ presidents ‘Star Wars’ makeover
How hackers can control your car from miles away
Play Videos
Philadelphia's real signature sandwich
Full disclosure: 3 bedrooms, 2 baths, 1 ghoul
Europe's migrant crisis, explained

To keep reading, please enter your email address.

You’ll also receive from The Washington Post:
  • A free 6-week digital subscription
  • Our daily newsletter in your inbox

Please enter a valid email address

I have read and agree to the Terms of Service and Privacy Policy.

Please indicate agreement.

Thank you.

Check your inbox. We’ve sent an email explaining how to set up an account and activate your free digital subscription.