Brussels, 15/07/2014 (Agence Europe) - The head of the European Central Bank, Mario Draghi, has warned member states not to water down the stability and growth pact (SGP).
At a monetary policy discussion with the European Parliament's economic and monetary affairs committee in Strasbourg on Monday 14 July, Draghi said countries needed to ensure there were no backward steps on the revised stability and growth pact or watering it down to such an extent that it no longer forms a credible framework.
Draghi, who was formerly the governor of Banca d'Italia, says the SGP already allows sufficient flexibly to deal with the budget and economic situation of each member state. He called for “necessary” structural reforms, such as reform of the labour market, to be implemented in order to boost competitiveness. “Structural reforms are slow processes but we are seeing improvement. These processes should be accompanied by growth-friendly fiscal consolidation, lower taxes and measures to complete the single market”, he said.
He repeated his proposal for a European governance framework to be put in place making application of reforms set out in the social and economic policy recommendations from Brussels for each country in the EU more binding than what had recently been approved (see EUROPE 11120).
Euro. The head of the ECB said that too high a euro exchange rate threatened the sustainability of the recovery although down-side risks on the economy were easing up. He said that the ECB committee was unanimous in its willingness to introduce unconventional measures to deal with a sustained period of low inflation. Alongside the recent announcement of new capital injections to encourage banks to lend to the real economy, the ECB is considering the potential of quantitative easing if the announced measures are not effective enough. (MB)