Mario Draghi has upped the ante in his calls for reform in the Eurozone in a speech in Brussels this morning, warning that employment and productivity will take a unrecoverable hit if governments do not take his calls seriously.
The ECB chief, who believes governments have left monetary policy to do the heavy lifting in terms of hauling the single currency bloc back to growth, said it as in "everybody's interest to act without undue delay." Without action soon, the Eurozone risks losing potential growth, Draghi warned.
"The cost of delay ... is that labour and productivity suffer, and the output gap closes in the 'wrong way' - instead of output rising towards potential, it is potential that falls towards current output."
He continued: "It means [governments need to] devote every effort to ensuring that output is returned to potential before sub-par growth causes lasting damage. And, given the harm that has already occurred to potential growth during the crisis, it also means acting decisively to raise potential."
Yesterday, the ECB began buying corporate bonds as part of its quantitative easing programme, in its latest attempt to drive down the cost of borrowing, encourage spending and stoke inflation. The Eurozone grew by 0.6 per cent in the first quarter of the year, faster than the US and the UK, though experts predict it will be hard to sustain such pace.
Cost of delay "too high"
Draghi said that unemployment across the Eurozone was far too high, pointing out the "large, latent potential in the Eurozone labour force which can be unleashed".
The comments are one of Draghi's most focused attacks on governments which are not pulling their weight in helping the Eurozone break out of its slumber.
He has previously said ECB policies could only realise their full potential with the support of governments, now he is arguing that Europe will suffer a unrecoverable loss of growth, jobs and productivity unless action is taken sooner rather than later - especially when "the Eurozone's unfavourable demographics start to bite".
On specific policies he would like to see, Draghi said the quickest win would be completion of the single market in services. He also identified labour reforms undertaken in Spain and Portugal as positive steps, in a possible message to France, Italy and Greece - other countries which have flirted with loosening their restrictive labour codes.
In a final blow at politicians who complain that reform is difficult, Draghi said: "There are many understandable political reasons to delay structural reform, but there are few good economic ones. The cost of delay is simply too high."