LOW INTEREST rates in the Eurozone are not being passed through to households and firms, Mario Draghi warned yesterday, hitting economic growth hopes.
The president of the European Central Bank (ECB) said authorities should try harder to reverse the financial fragmentation that has led to different effective interest rates in different countries.
In a speech in Frankfurt Draghi said varied rates strike at the core of the Eurozone, which was designed to further the single market and remove variations between countries.
Fragmentation also hinders the economic recovery by preventing households and firms benefiting from cheap credit, he added.
“Greater financial integration is a key part of building the single market – and something that improves the functioning of national financial systems,” Draghi said. “Financial integration leads to better risk-sharing and diversification, it makes markets deeper and more liquid, and it encourages competition.”
Since the financial crisis banks have tended to withdraw from foreign markets in whole or in part, reversing that trend to integration and undermining efforts to boost growth through low interest rates.