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ECB: Draghi asks for faster response of Eurozone governments to reforms

Mario Draghi, President of the European Central Bank (ECB) warns on lack of actions of Eurozone leaders at the Brussels Economic Forum.

Draghi asked the governments to act in all policy areas in order for stabilisation of the economy to occur. “In the euro area, many structural reforms have been implemented in recent years, and especially in those countries worst-hit by the crisis. The benefits can now be seen. But there are many more benefits still to aim for, and so much more needs to be done,” stressed Draghi.

As consolidation after 2010 in the area was implemented in some countries mainly through tax rises rather than current spending cuts, the full burden of macroeconomic stabilisation was placed on monetary policy, as Draghi suggests. “This has led to a slower return of output to potential than if fiscal policy had been more supportive. This is why the ECB has said many times that fiscal policy should work with not against monetary policy,” underlined the man responsible for the Euro area’s monetary policy.

“Supporting demand is not just a question of the budget balance, but also of its composition, especially the tax burden and the share of public investment,” he adds. “We should not see fiscal policy as solely a macroeconomic tool, which is only available to countries with strong public finances. We should also see it as a microeconomic policy tool that can enhance growth even when public finances need to be consolidated.”

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