| Euro zone not in danger, says ECB chief |
PARIS The euro zone is not in danger of breaking up despite some analysts’ worse case scenarios, European Central Bank President Mario Draghi said, judging that the bloc was inevitably marching towards closer union among its members.
Asked in an interview with French newspaper Le Monde if the euro were in danger, Draghi said: “No, absolutely not. We see analysts imagining the scenario of a euro zone blow-up.”
“They don’t recognise the political capital that our leaders have invested in this union and Europeans’ support. The euro is irreversible,” he added.
In the long term, the euro would need to rest on a foundation of greater integration among euro zone countries, Draghi said.
“All movement towards financial, budgetary and political union is for me inevitable and will lead to the creation of new supranational bodies,” he said.
European leaders took a step towards greater integration last month at a Brussels summit where they agreed to put the ECB in charge of supervising banks and gave the ESM rescue fund the power to recapitalise troubled banks.
However, the summit provided only brief relief to investors. Concerns about Spain have returned to the fore, driving the country’s 10-year bond yields above the 7-per cent danger level.
European and US stocks also fell and the euro hit record lows against the Australian, Canadian and New Zealand currencies in the face of increasing investor fears that the Spanish government may seek a full-blown bailout.
Draghi poured cold water on the prospect that the ECB could take action to calm the situation, saying that its mandate did not allow the central bank to resolve states’ financial problems.
The International Monetary Fund has urged the ECB, which is legally forbidden from financing governments, to play a greater role fighting the crisis, suggesting that it could be given lender-of-last-resort functions. At the summit in June, EU leaders broadened the ECB’s role to include supervising banks in hope that the move would cut the risk that troubled lenders’ problems could spread to sovereign borrowers.
Draghi said that the ECB’s monetary policy and bank supervisory activities would have to be kept separate in order to avoid conflicts of interest and suggested that an “independent structure” could be built.
Agencies
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