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European Central Bank (ECB) chief Mario
Draghi said Friday at the World Economic Forum that the European debt
crisis would continue to burden economies for some time.
Risk premiums of Europe's highly indebted countries might remain
high, he said at the annual conference in Davos, Switzerland.
"Now they are overshooting the sovereign risks, and this may go on
for quite a while," he said.
His comments were underscored by rising Portuguese bond yields on
Friday, which hit record levels amid market fears that the country
could become the next victim of the eurozone debt crisis.
Yields for 10-year bonds rose to 14.83 percent, from 14.80 percent on Thursday.
On the other hand, Italy on Friday sold 11 billion euros ($14.4
billion) of short-term government bonds at sharply lower
yields, possibly indicating growing investor confidence in the
eurozone's third largest economy.
Draghi was somewhat more optimistic about financial markets and
Europe's banks.
He noted that the bond market had been revived and that the ECB
had injected nearly 500 billion euros into eurozone banks, but said
that it would take more time for interbank trading to recover fully.
The effect that the eurozone crisis could have on other regions
was highlighted by U.S. Treasury Secretary Timothy Geithner.
The United States' economy would grow by up to 3 percent this
year, he said, but added, "I think that's a realistic outcome as long
as we don't see a lot of risks coming out of Europe."
While noting that U.S. economic indicators were pointing upwards, he
acknowledged the "very high levels of poverty in this country, very
high levels of inequality and an erosion in people's confidence in
their (social upward) mobility."
Geithner also weighed in on Europe's financial firewall. He called
for E.U. countries to expand their emergency fund to stem the eurozone
crisis and said this would make it more likely for the International
Monetary Fund to lend more help amid the eurozone crisis.
German Finance Minister Wolfgang Schaeuble found himself isolated
in Davos as he called for solving Europe's underlying budget issues
rather than raising emergency funding.
Both his French counterpart Francois Baroin and E.U. Economy
Commissioner Olli Rehn joined Geithner in calling for raising the
financial firewall.
