Describing the eurozone economy as “steadily recovering”, European Central Bank President Mario Draghi called yesterday (16 March) for a “quantum leap” in institutional convergence of the eurozone.
A week after the ECB began printing money to buy sovereign bonds, Draghi said the bank’s stimulus, lower oil prices and structural reforms in eurozone economies were helping support growth in the 19-country bloc.
“We are meeting against the backdrop of a steadily recovering economic situation in the euro area,” he said in a speech for delivery at a finance conference.
“Most indicators suggest a sustained recovery is taking hold,” he added. “Confidence among firms and consumers is rising. Growth forecasts have been revised upwards. And bank lending is improving on both the demand and supply sides.”
The ECB had helped generate this upturn, said Draghi. Earlier on Monday, the ECB said it settled €9.751 billion of public-sector bond purchases in the first week of the programme to pump more than €1 trillion into the eurozone economy.
Under this quantitative easing (QE), the ECB intends to buy €60 billion a month of mainly sovereign bonds until September 2016, or beyond if needed to see a sustained adjustment in inflation back towards the ECB target.
The central bank projects its QE plan will invigorate a frail eurozone recovery, already helped by lower oil prices and a revival in bank lending.
But Draghi warned the currency area’s economies and institutions have not converged sufficiently.
“This is why, whenever there is a serious shock in any part of the euro area, questions about the sustainability of the union still arise,” he said, pressing countries to reform their economies to stand on their own two feet.
Eurozone countries had not yet converged sufficiently to dispel doubts about the bloc’s cohesion, said Draghi, stressing: “We have now integrated too much to even entertain reversing the process – our economies are far too intertwined.”
Draghi has been pushing deeper integration since early 2012, when the eurozone debt crisis led him and other top crisis-fighting figures to work on a roadmap towards a banking union, fiscal union, economic union and political union.
His French predecessor, Jean-Claude Trichet, called in 2011 for a central European finance ministry.
The Italian ECB president noted Europe’s fiscal rules have repeatedly been broken, straining trust among countries.
In response, he proposed deeper institutional integration, with more shared sovereignty and strengthened accountability of the European Union towards its citizens.
“In sum, my conclusion is that there must be a quantum leap in institutional convergence,” Draghi said.
“We need to move from a system of rules and guidelines for national economic policy making, to a system of further sovereignty sharing within common institutions,” he added.