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Draghi Sounds Hopeful Note on Europe’s Economy, but Reassures That E.C.B. Is Ready to Act

Mario Draghi, the E.C.B. chief, acknowledged on Monday that economic performance was still “dismal” and that unemployment was unacceptably high in the eurozone.Credit...Eric Vidal/Reuters

FRANKFURT — The president of the European Central Bank on Monday gave a slightly more optimistic assessment of the eurozone’s economy, saying that a decline in bank lending appears to have reversed and pointing out that the economies in most countries in the region are growing.

“We have a certain amount of confidence that the credit cycle is now turning for the better,” Mario Draghi, the E.C.B. president, told members of the European Parliament in Brussels.

A lack of bank credit for businesses has been one of the fundamental problems in the eurozone, so a turnaround would be good news for the region’s economy. That is particularly true in countries like Italy, where companies are especially dependent on banks, as opposed to capital markets, to finance expansion and hiring.

Mr. Draghi acknowledged that economic performance was still “dismal” and that unemployment was unacceptably high. He repeated that the bank would be prepared to buy government bonds in order to stimulate the economy if the measures it had taken so far did not prove to be effective enough.

Mr. Draghi’s appearance before the Parliament’s Committee on Economic and Monetary Affairs came three days after official figures showed that the eurozone grew at an annualized rate of 0.6 percent in the third quarter. While that pace of growth was hardly torrid, Mr. Draghi noted that only two of the 18 countries in the eurozone — Italy and Cyprus — were in recession.

“Our expectation for a moderate recovery in 2015 and 2016 remains in place,” Mr. Draghi said.

His statement, though incrementally more upbeat, was consistent with others he has made in recent months, in which he has left the door open to the same “quantitative easing” used by the Federal Reserve in the United States and other central banks to stimulate their economies.

The European Central Bank has been edging closer to large-scale purchases of government bonds, which are seen as an essential component of quantitative easing. But the bank also seems to hope that this controversial step will not be necessary.

Mr. Draghi said he thought that previous measures by the bank were beginning to show results, including low interest rates and a program that grants loans to banks on very favorable terms, if they in turn lend the money to businesses and individuals.

If those measures do not do the job, he said, repeating an assurance from two weeks ago, “the governing council is willing and stands ready to act.”

The central bank is already buying private-sector assets, but the amounts are seen as too small to have a major impact on the economy, at least so far. On Monday, the bank said that it had bought about 3.1 billion euros, or $3.9 billion, in covered bonds last week. Covered bonds typically are real estate loans packaged as debt and guaranteed by the issuing banks.

In a separate speech, a European Central Bank official said that the bank could also buy gold, stocks or other securities traded on exchanges.

But the official, Yves Mersch, a member of the bank's six-member executive board, listed numerous reasons why quantitative easing, and in particular large-scale purchases of government bonds, might not work as well in Europe as it did in the United States.

The Federal Reserve “operates in a completely different environment than the E.C.B.,” Mr. Mersch said at a banking conference in Frankfurt.

Bond purchases aimed at pushing down long-term interest rates would have less effect in Europe, Mr. Mersch said, because most credit flows through banks rather than capital markets.

He also expressed concern that if some governments defaulted on debt purchased by the bank, it would face a conflict between printing money to cover the losses and keeping inflation under control.

Mr. Mersch acknowledged that quantitative easing could have a positive psychological effect on markets. But he said he was concerned that government bond purchases by the bank would effectively make eurozone taxpayers liable for each country’s debt, without the approval of elected officials. National governments in the eurozone are ultimately liable for any losses suffered by the bank.

“It is questionable to what extent it would be justifiable to communalize credit risks,” Mr. Mersch said.

He noted that many of the calls for the E.C.B. to begin quantitative easing come from the United States and Britain.

Mr. Mersch said he wished “that these well-meaning suggestions were based on thorough understanding of the institutional and legal limits of the E.C.B. as well as the economical particularities of the euro area.”

A version of this article appears in print on  , Section B, Page 7 of the New York edition with the headline: European Central Bank Head Is Optimistic, but Says Bank Is Ready to Act. Order Reprints | Today’s Paper | Subscribe

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