European Central Bank President Mario Draghi warned European leaders on Thursday (17 March) that monetary policy alone would not be enough to jumpstart the economy and that governments needed to do their job by pushing through structural reforms.
“I made clear that even though monetary policy has been really the only policy driving the recovery in the last few years, it cannot address some basic structural weaknesses of the eurozone economy,” Draghi told reporters.
“For that you need structural reforms, mostly driven to raise the level of demand, public investments and lower taxes. Even more importantly, one needs clarity on the future of our … monetary union,” he said after speaking to EU leaders.
European leaders will discuss further integration of the economies and policy-making of the 19 countries sharing the euro at a summit in June.
Ideas for further integration, put forward by the European Commission, France and Italy, include a joint deposit-guarantee scheme, a eurozone finance minister and a joint treasury.
Among the most controversial ideas is the joint issuance of debt, for instance to help finance reforms or to counter the effects of troughs in the business cycle. Germany strongly opposes the joint deposit-guarantee plan as well as any joint debt issuance.
Draghi spoke to reporters after briefing European leaders on the state of the eurozone economy and the risks it was facing.
“The economy is recovering, albeit with a lower momentum. We see signs of improvements in various parts of the economy — partly in the labour market, partly in the credit market,” Draghi said.
“But the risks remain on the downside and some of these risks have been intensifying, starting with early December last year,” he said.
Draghi said he expected ECB interest rates to stay low, or to be even lower than now, for a considerable period.
“The Governing Council expects the interest rates to remain at present, or at lower levels … for an extended period of time and well beyond the end of our asset purchase programme,” he told reporters, repeating his remarks from last week.
In December, the ECB extended the duration of its asset purchase programme, under which the bank buys eurozone government bonds to inject more cash into the slow-growing economy, by six months until March 2017 — “or beyond” as Draghi said.