SANTIAGO Europe's troubled economies will begin to recover by mid-2013, and while the recuperation will be more significant for core countries, all nations will see some growth by 2014, European Central Bank Vice President Vitor Constancio said on Saturday.
The ECB considered an interest rate cut on Thursday, but held the rate stable, and predicted the euro zone economy would shrink again in 2013, leaving the door open to a possible reduction in borrowing costs early next year.
The bank slashed its forecasts for the euro zone economy on Thursday, showing a contraction next year was very likely before a return to growth in 2014.
"(We see) a recovery of positive growth in 2014, which indicates that we consider that as of 2013 we're going to see a recovery of the real economy," Constancio told a press conference after a central bankers' meeting in Santiago. He was flanked by Bank of Spain governor Luis Maria Linde and Chilean central bank chief Rodrigo Vergara.
The ECB cut its estimate of gross domestic product (GDP) for next year to between a decline of 0.9 percent and growth of just 0.3 percent. In their first forecasts for 2014, ECB staff forecast GDP growth of 0.2 to 2.2 percent.
"The recovery will be more significant for core countries because the countries under stress will continue next year their adjustment policies. These adjustment policies are working," he added. "For 2014 the situation will be different because we expect that all countries will enjoy some growth."
With euro zone unemployment at a record high and the single currency area divided about how to resolve a banking crisis brought on by the 2008/2009 global financial crisis, companies and households are reluctant to spend while governments are cutting to bring down their budget deficits.
But a slowly recovering U.S. economy and strong Chinese demand mean German exports - which account for 40 percent of the euro zone's total foreign sales - still have a market even as demand in indebted southern Europe shrivels.
Constancio declined to discuss future monetary policy action.