ECB Faces Sluggish Economy With Rates Already Low
So far the other eurozone countries have had to bail out three small countries â¿¿ Greece, Ireland and Portugal â¿¿ with rescue loans along with the International Monetary Fund. Leaders are now trying to support Spain and Italy, which are much larger. A full scale bailout for both would stretch the resources of the other countries.
At his news conference, Draghi was expected to underline that Spain needs to agree to strict conditions before it can get that help. The ECB has stressed that countries must first apply for financial help from the eurozone bailout fund, the European Stability Mechanism, and agree to a list of steps to reduce their deficits.
Spain's Prime Minister Mariano Rajoy has held off applying, apparently concerned that surrendering that much authority over his country's finances would be politically unpopular.
Rajoy's delay has started to unnerve financial markets that relaxed after the ECB announced the bond purchase plans. Interest rates on short-term Spanish debt have risen.Draghi will also be questioned about his outlook for the eurozone's troubled economy. Lack of growth is a key obstacle to efforts to end the debt crisis because growth makes a country's debt burden smaller relative to the size of the overall economy. The eurozone shrank 0.2 percent in the second quarter and is in danger of shrinking again in the third quarter. A recession is typically defined as two straight quarters of economic contraction. Unemployment is at 11.4 percent, the highest since the shared euro currency was introduced by the European Union in 1999.
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