Mario Draghi's comment today that he sees “tentative signs of stabilization” in the Eurozone's economy makes no sense.
Bloomberg: “According to some recent survey indicators, there are tentative signs of stabilization of economic activity at low levels,” Draghi said at a press conference in Frankfurt today after the ECB kept its benchmark interest rate at 1 percent following two straight reductions.What stabilization? The Eurozone's banking system is under so much pressure that it is choking the "real economy". Net loans to corporations and households have fallen off the cliff. For anyone to expect that growth will stabilize based on these statistics is sheer madness.
|Net change in loans to Eurozone households - EUR millions (source: ECB)|
|Net change in loans to non-financial Eurozone companies - EUR millions (source: ECB)|
Draghi looks like a hero because of the LTRO program, but to claim economic stabilization is not only premature but will hurt the central bank's credibility.