The eurozone''s crisis is far from over and its members must consolidate their budgets and forge a banking union to put the bloc on a more stable economic footing, the leaders of the IMF and European Central Bank said on Friday. Underlining the bloc''s woes, data showed both German retail sales and French consumer spending falling faster than expected as well as stubborn Spanish inflation that will likely lift the cost of state pension rises for an already hard-pressed budget.
Eurozone wide numbers showed another 173,000 people joining record jobless queues in October, while a dive in consumer price inflation offered only limited relief to households struggling with the recession. Speaking in Paris, where the government is trying to dispel concerns raised by the IMF that France could be left behind as Italy and Spain reform at a faster pace, ECB President Mario Draghi said the eurozone''s three-year-old crisis was likely to stretch deep into next year.
"We have not yet emerged from the crisis," Draghi told Europe 1 radio. "The recovery for most of the eurozone will certainly begin in the second half of 2013." "It''s true that budgetary consolidation entails a short-term contraction of economic activity, but this budgetary consolidation is inevitable," Draghi said, speaking through a translator. ECB policymakers hold their regular monthly policy meeting next week and are widely expected to leave interest rates on hold at a record low of 0.75 percent. Economists are divided on whether the central bank will cut next year.