LITTLE ROCK — European Central Bank President Mario Draghi said Thursday that the euro-area economy will slowly return to health in 2013 as the region’s bond markets stabilize after three years of turmoil.

“We have signs that fragmentation is being gradually repaired,” Draghi told reporters in Frankfurt after the central bank kept its benchmark interest rate at 0.75 percent. “We spoke a lot about contagion when things go poorly but I believe there is a positive contagion when things go well. And I think that’s also what is in play now. There is a positive contagion.”

Draghi chaired the Governing Council’s first decision of the year as the crisis that started in early 2010 shows signs of waning. The central bank’s pledge to buy as many government bonds as needed, plus “significant” political progress on melding the euro’s 17 economies together, has diminished concerns that the currency bloc would break up.

“A gradual recovery should start” later this year as European Central Bank measures work their way through the economy, Draghi said.

Spain’s 10-year borrowing costs, which hit a euro-era record of 7.75 percent in July, fell below 5 percent Thursday for the first time since March. The euro climbed the most in four months against the dollar, rising 1.2 percent to $1.3219. The currency advanced to the highest since July 2011 against the yen.

“The dramatic improvement in financial conditions in the eurozone is exerting a powerful influence on the ECB Governing Council,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London. “The ECB is sitting firmly on its hands in the hope that the upturn in sentiment will eventually filter through tothe real economy.”

Draghi said it’s too early to claim success. Four countries, including Greece and Spain, are still in bailout programs, the euro region’s economy is still in recession and Italy faces elections next month that could bring fresh turmoil to the euro’s third-largest economy.

Risks to the outlook are on the “downside,” and the need for balance sheet adjustmentsand “persistent uncertainty” continue to weigh on growth, he said.

Still, Draghi felt comfortable enough to read a list of improvements in markets over recent months, claiming European Central Bank measures had helped to bring about the calm.

“Bond yields ... are much lower,” he said. “Stock markets have increased. Volatility is at a historical minimum.”

Those signs of improvement led the Governing Council to “see no reason” to change its outlook for price stability and the decision to keep rates unchanged was unanimous, he said.

“Inflation rates are expected to decline further to below 2 percent this year,” Draghi said, adding that risks to the inflation outlook remain “broadly balanced.’

“If you look at the overall landscape, you would see a significant improvement in financial market conditions and a broad stabilization of market indicators,” the he said.

“A rate cut this year seems more and more unlikely, unless the economic recovery disappoints in strength or timing,” said Christian Schulz, senior economist at Berenberg Bank in London. Still, “the improvements are not strong nor quick enough to cause any concern about upward price pressures emerging over the forecast horizon.”

Business, Pages 25 on 01/11/2013