European Central Bank President Mario Draghi, reflecting growing anxiety among Europeans about their economic plight, said on Thursday (3 May) that growth should be at the heart of euro zone policy but that it needed to go hand in hand with fiscal austerity.
At a news conference in Spain, one of the countries worst hit by the bloc's debt crisis, Draghi said there was "absolutely no contradiction" between pursuing a growth pact and pushing ahead with Europe's already-agreed treaty on budget discipline.
"I certainly agree with your question when you say we have to put growth back at the centre of the agenda, without any contradiction with the need to continue, persevere in fiscal consolidation," Draghi said.
The Italian issued a veiled criticism to the EU's current leaders when he suggested that the euro currency bloc lacked a long-term vision.
"Collectively, we have to specify a path for the euro – how we see ourselves in 10 years from now," Draghi said, elaborating on comments made the week before.
The ECB chief helped shift the tone of the economic policy debate in the euro zone last week when he advocated a "growth compact" without spelling out exactly what he meant.
Voters and investors are becoming increasingly disillusioned with the German-led call for austerity – summed up in the budget-constraining "fiscal compact" – as the currency bloc slides back into recession.
Voters in France and Greece are expected to oust their leaders in national elections this weekend, where the euro zone crisis has taken centre stage.
In France, socialist presidential candidate François Hollande, who leads in opinion polls, has built part of his campaign on a pledge to renegotiate the EU fiscal discipline treaty to add a growth component to it.
Draghi again seemed to echo those worries, with an official ECB statement mentioning the word "growth" 13 times.
"Growth and growth potential in the euro area need to be enhanced by decisive structural reforms," the ECB chief said in a statement. "In this context, facilitating entrepreneurial activities, the start-up of new firms and job creation is crucial," he added, citing measures aimed at "increasing the wage and employment adjustment capacity of firms" as key to "foster innovation, promote job creation and boost longer-term growth prospects."'
Draghi faces resistance in Berlin over his "non-standard" policy choices, flooding the financial markets with cheap liquidity to stem the euro debt crisis.
The Italian is under pressure to limit the ECB's role from Bundesbank chief Jens Weidmann, who wants countries to put their finances in order rather than looking to the central bank.
Draghi also faces resistance from the powerful Bundesbank to any potential rate cut or a reactivation of a bond-buying plan launched to help keep borrowing costs in the likes of Spain and Italy lower.
"The euro crisis has not escalated to such an extent recently that he would want to take on the Bundesbank on that," Berenberg Bank economist Holger Schmieding said of the bond-buying programme.
The ECB has pumped over €1 trillion into the financial system in recent months, smoothing debt issuance for euro zone members. And Draghi insisted that the time was not right for the ECB to consider pulling back on some of its crisis-fighting policies, dubbing such an idea "premature".