ECB chief Mario Draghi called for the completion of the eurozone framework and to reduce divergencies between West and East members in order to protect the euro in a more “unstable” world on Monday (26 November).
As the euro nears its twentieth anniversary next January, eurozone members are struggling to strengthen the economic and monetary union.
The Eurogroup aims to improve the European Stability Mechanism, the region’s anti-crisis fund, with new tools. The euro partners also want to complete the banking union by adding a common backstop to resolve ailing banks.
But the snail-pace progress to bolster the euro area is far from the high expectations held by some countries, in particular France.
Draghi told the European Parliament’s committee on Economic and Monetary Affairs that the next months will be “decisive in making concrete steps” to reform the monetary union before the European elections next May.
Draghi stressed that the time to act is now.
“Many of the basic steps for this to happen need to be taken now, namely designing an ambitious reform plan and building trust among all parties,” he told the MEPs.
Draghi listed three priorities: strengthening the policy coordination, establishing a fiscal instrument for the eurozone to absorb economic shocks, and completing the banking union and an “ambitious” capital markets union.
“We need to rekindle faith in our common rules and ensure that they are respected,” the central banker said.
His comments come as Italy remains at loggerheads with EU parters over its spending plans for next year given its immense public debt of 131% of GDP.
Draghi told MEPs that he’s “always been confident” that Italy can reach a deal with the EU over the draft budget.
But he insisted that “countries with high debt should reduce debt.”
The Italian government made a conciliatory gesture on Monday as it said that the deficit target for next year could be 2%, lower than the initial goal of 2.4% of GDP.
EU officials welcomed the “positive signal” coming from Rome. But they told EURACTIV.com that the important indicator in the standoff is not the headline deficit, but the structural effort required to cut the public debt.
Euro at stake
The consequences of an ill-designed EMU were also described from a different angle by ECB’s Executive board member Benoit Coeure.
He warned that if divergences between West and East eurozone members are not reduced faster, the euro itself could be at stake.
“If there is no credible prospect of lower-income countries catching up soon, there is a risk that people living in those countries begin questioning the very benefits of membership of the EU or the currency union,” he said on Monday in Vienna.
“Such doubts would be particularly worrisome in the unstable world we are currently living in,” he added.
End of programme
Draghi told the European Parliament that the economic data gathered since September was “somewhat weaker than expected”, pointing to a continuation of the loss in growth momentum in the eurozone.
But despite this worrying signals, the Italian confirmed that the ECB will end its bond-buying programme next month.
Still the Frankfurt-based institution will maintain a “significant degree of monetary policy stimulus”, he said, given the “prevailing uncertainties.”
One of the tools would be reinvesting cash from maturing bonds.
Draghi explained that the loss in growth mainly reflects weaker trade, and some country and sector-specific factors.
He also said that it is “normal” as the expansion may be reaching is peak.