Current eurozone set-up is ‘unsustainable’: Draghi
The president of the European Central Bank, Mario Draghi, called on Thursday for eurozone leaders to lay out a vision for the future of the embattled bloc, as its current set-up is “unsustainable.”
“The next step … is basically for our leaders to clarify what is the vision for a certain number of years from now. How is the euro going to look … in a certain number of years from now,” Draghi said in the European Parliament.
“I think the sooner this is specified, the better it is,” Draghi added, speaking in his capacity as head of the European Systemic Risk Board.
The ECB cannot “fill the vacuum” left by EU governments in the fields of structural reforms or governance, Draghi insisted.
Nor can the central bank tackle the problem of a lack of capital and risk aversion currently hampering the markets, he stressed.
One of the steps that could contribute to the vision Draghi called for was a “banking union” with greater centralisation of oversight, he said.
On Wednesday, the president of the European Commission, Jose Manuel Barroso said the “building blocks” of a full-fledged eurozone would now include “a banking union with integrated financial supervision and single deposit guarantee scheme.”
Draghi compared the troubled eurozone to a swimmer struggling to cross a river in fog.
“He or she continues fighting against the current but doesn’t see the other side of the river because it is foggy … we need to dispel this fog,” he said.
That is the best contribution that countries can make to lowering borrowing costs and bolstering growth in the eurozone, he said.
He said the configuration of the eurozone “has been shown to be unsustainable unless further steps are being undertaken.”
“The financial crisis that started four years ago, four and a half years ago, has changed our risk perception in a substantial way and it has increased, heightened our risk aversion in a dramatic way,” he said.
While there has been “renewed bouts of volatility and uncertainty” on the markets recently, the turbulence is “not at the same levels reached in November 2011,” he judged.
Draghi also announced that four Greek banks suspended from the ECB cash taps earlier this month had been readmitted.
“The recapitalisation has now taken place, so the four Greek banks have been readmitted to the monetary policy operations,” he said.
Asked about possible bank runs in the event of break up of the eurozone, Draghi pledged: “The ECB will continue lending to solvent banks. And will keep the liquidity lines active and alive with solvent banks.”