Draghi: This is no time for a spending spree

Tim Wallace
Follow Tim
EUROZONE governments must not relax their efforts to cut deficits just because of hints of an economic recovery, Mario Draghi warned yesterday.

It came as ratings agency Standard and Poor’s said it fears complacency among Eurozone politicians.

The President of the European Central Bank (ECB) said the recovery is gathering pace in part because governments have begun to get their borrowing under control and have pushed ahead with economic reforms.

“Eurozone countries should not unravel their efforts to reduce deficits and put high government debt ratios on a downward path,” he said.

“The draft budgetary plans that countries will now deliver for the first time under the two-pack regulations need to provide for sufficiently far-reaching measures to achieve the fiscal targets for 2014.”

Draghi’s warning came as credit ratings agency Standard and Poor’s said high levels of debt are still a problem, despite recent efforts to cut deficits.

But an improvement in economic conditions combined with voters’ dislike of spending restraint could prompt politicians to start spending more, the agency said.

The ECB boss also said he is “ready to use all available instruments including an LTRO (long-term refinancing operation)” to pump more liquidity into banks, if necessary.

And he noted some members of the ECB governing committee had pushed for an interest rate cut.