Friday

20th Sep 2019

Euro is 'irreversible' and 'permanent', says ECB chief

  • Banks first, then growth, says Draghi (Photo: EPP Group)

The euro is "irreversible" and will overcome the crisis, European Central Bank chief Mario Draghi said in his first appearance in front of the European Parliament's economics committee on Monday (19 December), while making the case for austerity and fiscal discipline.

In line with Berlin and the ECB's own stance so far, Draghi rejected calls for his institution to step in majorly to alleviate the borrowing costs of Italy and Spain, which in turn would help them restore economic growth and jobs.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

Pressed by MEPs to explain why the ECB puts its "credibility" higher than actually boosting economic growth and jobs in troubled eurozone countries, similar to what the US Federal Reserve or the British central bank are doing, Draghi insisted that his institution does not have "the mandate" for such intervention.

"The Fed's mandate is different, it is also geared on growth and jobs. We are much more restricted to monetary stability," he explained.

As for the current crisis, the ECB chief said he has "no doubt in the strength, permanence and irreversibility of the euro," dismissing as "morbid speculation" any eurozone break-up scenarios.

Austerity, however, cannot be avoided, Draghi said, welcoming the fact that EU leaders earlier this month pledged more fiscal discipline measures, dubbed a "fiscal compact".

"To restore trust, we need the elements contained in the compact. On top of this we then need structural reforms to ensure growth", he added.

His most pressing concern was linked to a potential credit crunch in 2012, with banks wary of lending to each other, to households and to small enterprises, which in turn could trigger a deeper recession than expected.

"Banks will face a significant funding constraint especially in the first quarter, but the whole year is going to be difficult for banks. We want to avoid the possible recession and if we can relieve funding pressure, it is already a good part of the answer," he said, in reference to the eurozone's temporary bail-out fund (EFSF) which from 1 January will be able to help out struggling banks with the technical assistance of the ECB.

Meanwhile, warnings by big rating agencies that France and other eurozone countries may have their top rating downgraded in the coming months should not be given too much importance, he said.

Ratings agencies were underestimating the weaknesses of some eurozone countries before the 2009 financial crisis, whereas "now they are overshooting the actual risk" and forcing the borrowing costs up.

However, the days of one-size-fits-all premium ratings for all euro-countries are over and will never return, Draghi said.

"We have to get used to spreads, to riskiness. In a way it is healthy, as it sends a message to national and EU politicians they have to speed up processes," he said in reference to record-high borrowing costs for Italy and Spain compared to Germany.

ECB chief hints at more robust action

ECB president Mario Draghi offered hints on Thursday that the Frankfurt institution is ready to expand its efforts to staunch the eurozone crisis, but only if eurozone economies commit to deeper integration rapidly under what he called a “fiscal compact”.

ECB will not become bank of last resort, Draghi says

In his first appearance as head of the ECB, Mario Draghi has said the Frankfurt-based bank will not become the lender of last resort for the eurozone. The bank lowered its interest rate by 25 basis points to 1.25 percent.

Banks queue up for cheap ECB loans

Over 500 European banks rushed to borrow almost half a trillion euro in cheap loans from the ECB on Wednesday, highlighting the credit squeeze on the market. The cash injection only marginally increased investor confidence, however.

Hungary tops EU anti-fraud investigation list

In its annual report, the EU's anti-fraud agency said it concluded nine investigations into Hungary and found irregularities in seven cases. In total, the agency recommended the recovery of €371m EU-wide.

Exclusive

Brexit row delays financial products transparency review

A European financial regulatory body set up after the financial crisis is at loggerheads with the European Commission over whether to carry out a transparency review of certain financial products. The reason: Brexit.

News in Brief

  1. Austria to veto EU trade deal with South America
  2. Brexit minister asks EU for 'flexibility' to secure a deal
  3. Kovesi has 'sufficient majority' for prosecutor post
  4. France, Finland give UK ultimatum for Brexit plan
  5. Minsk talks bode ill for EU's peace summit on Ukraine
  6. Poll: Poland's nationalist rulers to win October election
  7. Irish lawyers clash with EU commission in Apple case
  8. NGOs take aim at EU smartphone pollution

Opinion

Why von der Leyen must put rights at core of business

Ursula von der Leyen's in-tray must include those European executives on trial for systematic workplace harassment, the break-up of European slavery rings, and allegations of European companies' abuse in palm oil, including child labour, land grabs, and deforestation.

Stakeholders' Highlights

  1. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  2. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  3. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  4. Nordic Council of MinistersNo evidence that social media are harmful to young people
  5. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  6. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  7. Nordic Council of MinistersEducation gets refugees into work
  8. Counter BalanceSign the petition to help reform the EU’s Bank
  9. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  10. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  11. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  12. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat

Latest News

  1. Malta PM accused of 'blackmail' over slain reporter
  2. Diplomats back Romania's Kovesi for EU top prosecutor
  3. Brexit raises questions for EU defence integration
  4. Low-carbon cities can unlock €21tn by 2050, report finds
  5. France, Italy want 'automatic' distribution of migrants
  6. Europe's refugee policy is test of its true 'way of life'
  7. A new Commission for the one percent
  8. Juncker: No-deal Brexit 'palpable'

Join EUobserver

Support quality EU news

Join us