European Central Bank President Mario Draghi said on Friday that budgetary consolidation in the euro zone would entail a short-term economic impact but the currency bloc was on track for a recovery in the second half of 2013.

Draghi told Europe 1 radio that euro zone governments must push ahead with implementing a banking union which should apply to all banks to avoid fragmenting the sector. Governments must pursue structural reforms to reduce labor market rigidity, notably in France and Italy, he added.

(Reporting By Nicholas Vinocur; Editing by Daniel Flynn)