Draghi: ECB can't do it all, governments must act
FRANKFURT, Germany (AP) — European Central Bank head Mario Draghi said Friday the bank is ready to do more to boost the shaky recovery in the 18 countries that use the euro — but warns governments must join in efforts to reduce stubbornly high unemployment.
"We stand ready to adjust our policy stance further" if needed to help the weak recovery, Draghi said in the text of a speech at the U.S. Federal Reserve conference in Jackson Hole, Wyoming.
The bank has cut interest rates, offered cheap loans to banks and is weighing asset purchases to pump more money into the economy.
His printed comments did not offer new guidance on when the bank might take action.
Instead, they underscored the standoff between Draghi and national governments in countries such as France and Italy. The French in particular have pushed for the ECB to do more, while Draghi has insisted that it's the governments in the multi-national euro that must take politically difficult steps to make their economies more business-friendly. He said Ireland had lowered unemployment more quickly coming out of the crisis due to a flexible economy, and Spain had benefited from loosening workforce rules as well.
Draghi said the bank was ready to act because the risk was low of negative side effects from more stimulus — such as excessive inflation — in the current slack economy. Inflation is a weak 0.4 percent, well below the bank's goal of just under 2 percent, and unemployment is painfully high at 11.5 percent. Growth was a distressing zero in the second quarter, as the economy stalled after four quarters of weak recovery from a debt crisis that almost broke up the currency union.
But Draghi said the ECB couldn't get the economy going by itself.
He said longstanding practices in some euro member countries were keeping unemployment high. He said national governments needed to enact reforms such as allowing companies to bargain wages at the firm level instead of accepting industry-wide agreements, a common practice in Europe. He said more freedom to adjust wages and workforce levels would make companies more willing to hire and reduce the time people who lose their jobs spend out of work.
"No amount of fiscal or monetary accommodation, however, can compensate for the necessary structural reforms in the euro area," he said.