By Simon Miller
The eurozone is still at risk of a downtown despite optimism for growth over the next year according to the president of the European Central Bank Mario Draghi.
Speaking at a press conference in Brussels, Draghi confirmed that interest rates would stay at 1% as real GDP contracted by 0.3% in the fourth quarter of 2011.
Despite the contraction, he added that survey data confirmed a stabilisation in economic activity at a low level in early 2012 with the expectation that teh eurozone would recover gradually in the course of the year.
Draghi continued: "The outlook for economic activity should be supported by foreign demand, the very low short-term interest rates in the euro area, and all the measures taken to foster the proper functioning of the euro area economy."
However, he continued: "The remaining tensions in euro area sovereign debt markets and their impact on credit conditions, as well as the process of balance sheet adjustment in the financial and non-financial sectors and high unemployment in parts of the euro area, are expected to continue to dampen the underlying growth momentum."
Draghi said that downside risks to the economic outlook prevailed and added: "They relate in particular to a renewed intensification of tensions in euro area debt markets and their potential spillover to the euro area real economy. Downside risks also relate to further increases in commodity prices."