Europe close: ECB expects economic recovery in second half

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LONDON (ShareCast) - -ECB tells banks to repay loans next week
-Spain's Economy Minister says his country does not need bailing out
-German's IFO reading exceeds expectations

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European equities were little changed by close Friday following news Eurozone banks would repay 137.16bn euros of three-year loans.

The European Central Bank (ECB) said 278 banks that received billions in cheap loans to keep them afloat during the economic crisis were to be repay them by January 30th.

Loans were made amid concerns that Greece, which required two international bailouts, could default on its debts.

Investors at the time had believed Spain and Italy were next in line for needed international assistance.

However, ECB President Mario Draghi said much progress was made over the past year in the Eurozone.

He expects Europe's economic recovery to take place in the second half of the year.

Draghi praised the recent measures carried out by the central bank including the long-term refinancing operation and the outright monetary transaction programme.

Although economic conditions are much more favourable than a year ago, this will be a year of implementation after the decisions taken in 2012, he said.

No need for bailout, says Spain's Economy Minister

Spain does not need a bailout, Economy Minister Luis de Guindos told Bloomberg.

He said budget cuts already planned will be enough to meet a deficit goal set by the European Union for 2013.

The county's economic woes eased after borrowing costs fell in the wake of the ECB's pledge in September to buy bonds if nations applied for aid.

However, Spain's unemployment climbed to a record 26% last year with just under 6.0m people out of work.

De Guindos declined to say if his country would meet an EU deficit forecast of 7.0% of gross domestic product in 2012, excluding European aid to banks.

The Spanish government said it would keep paying monthly benefits of up to €450 to long-term unemployed people until the jobless rate fell below 20%.

Deputy Prime Minister Soraya Saenz de Santamaria announced the extension to the policy after a weekly Cabinet meeting Friday.

German IFO reading exceeds expectations

The German IFO Institute's business climate index for January jumped to 104.2 points, its highest level since last June.

It follows a reading of 102.4 for the previous month and against a consensus view of 103.0.

Results were driven by the expectations sub-index, which increased to a reading of 100.5 from 98 previously. Sentiment improved most in manufacturing and construction.

The business climate index was based on a survey of 7,000 executives and showed signs Europe's largest economy was recovering from a slump at the end of last year.

TUI Travel (LSE: TT.L - news) shares recover

Tour operator, TUI Travel, saw its shares recover 3.87% after the stock plummeted earlier in the week following the news that it no longer intended to make a merger offer with TUI AG (Xetra: TUAG00 - news) .

STMicroelectronics (Milan: STM.MI - news) gained 3.65% after Exane raised its recommendation for the semiconductor maker to 'outperform'.

easyJet soared for a second day to 5.4% after UBS (Berlin: UBRA.BE - news) upgraded the budget airline to 'buy' from 'neutral'.

Nokia (Stockholm: NOKI-SEK.ST - news) fell 7.0% following Thursday's report that the phone-maker would omit dividends for the first time in at least 20 years.

SolarWorld (Other OTC: SRWRF - news) tumbled 30.75%, its biggest fall since selling shares to the public in 1999, after the German solar-panel maker said management was taking action to restructure its debt following a review of its earnings and financial planning by external advisers.

Brent crude futures fall

The euro/dollar increased 0.67% to the 1.3466 dollar mark.

Front month Brent crude futures fell by 0.44 dollars to the 113.230 dollar mark on the ICE.

RD