European Central Bank President Mario Draghi said on Tuesday he saw grounds for optimism on the euro area, as he defended his recent actions to shore up the bloc in front of a sceptical German audience. In a wide-ranging speech to the Federation of German Industries, Draghi also expressed confidence European governments would be able to set aside their differences on a proposed EU banking union spearheaded by the ECB. \"The first question that comes to mind for all of us is the following: \'Are there signs for optimism\'? Can we be confident that at some point this crisis will somewhat subside?\" Draghi asked. \"My firm belief and central message to you today is that -- provided all policymakers persevere with the necessary reforms -- we have a number of reasons to be positive about where the euro area is heading.\" He said there were \"signs of improved sentiment in financial markets\" and added the ECB expected the bloc to return to growth in 2013. \"At the same time, considerable progress is being made on all fronts to strengthen the foundations of the euro area,\" he said, noting that several member states were taking \"determined measures\" to reform their economies. The ECB chief defended his controversial programme of buying up the bonds of struggling countries, which has come under fire, notably in Germany, whose central bank chief voted against the plan. Earlier this month, following a pledge to do \"whatever it takes\" to save the embattled single currency, Draghi unveiled an unprecedented programme to support debt-wracked member states. Draghi said the ECB would buy unlimited volumes of short-dated debt of countries such as Spain or Italy, which would drive down their soaring borrowing costs, which he said was hampering the bank\'s monetary policy. However, before gaining access to the ECB\'s aid, countries must first apply for a bailout from the EU\'s rescue fund and sign up to tough conditions, including structural reforms. Draghi said there were \"early signs\" that this programme was beginning to have a positive effect, although he stressed that it was still too early to tell. Nevertheless, he emphasised that the programme was only a temporary plaster and the onus was still on governments to do their homework. \"Our measures can only build a bridge towards a more stable future,\" he said. While he said he had \"enormous respect\" for the Bundesbank, he said it was vital that the ECB had taken the action it had taken to stem the crisis that has tipped the entire bloc into recession. \"In the current circumstances, the greatest risk to stability is not action, but inaction. This is why the ECB has acted,\" he said. \"The euro supports the strong industrial sector on which Germany depends. It supports openness, growth and prosperity. And ultimately, it supports peace and stability. This is why the euro is irreversible,\" declared Draghi. On the vexed issue of the proposed EU banking union, Draghi said he was optimistic an accord could be found, amid disagreement -- notably between France and Germany -- on the speed with which a single supervisor should be set up. French President Francois Hollande said over the weekend that such a body, led by the ECB, should be established \"the sooner, the better.\" However, German Chancellor Angela Merkel reiterated earlier on Tuesday at the same conference as Draghi that the approach had to be \"step-by-step and in the correct order and not hasty and not just so we can say \'we have something\'.\" For his part, Draghi said: \"I am confident that governments will find agreement on the appropriate\" framework for the banking union, \"as well as issues related to democratic accountability.\" \"For our part, we will guarantee the firm separation of monetary policy from supervisory tasks,\" vowed the ECB chief.