Draghi: Markets will be hostile if states drag feet

Tim Wallace
Follow Tim
EUROZONE countries must reform their economies quickly, rather than be lulled into a false sense of security by the relatively benign market conditions, European Central Bank (ECB) boss Mario Draghi said yesterday.

Countries like France and Spain have been given extra time by the European Council to cut down their budget deficits.

But if they use the extra time to relax and slow down reforms, markets will start to doubt their determination to regain competitiveness, and borrowing costs will soar once again, the bank’s boss warned.

“It is essential that Eurozone countries do not unravel their efforts to reduce government budget deficits,” Draghi said.

“It is very important that decisions by the European Council to extend the time frame for the correction of excessive fiscal deficits should remain reserved for exceptional circumstances.”

And they must push ahead with freeing up their labour markets, increasing employment and making their economies more competitive, Draghi insisted.

The ECB held interest rates yesterday, though Draghi revealed they had considered implementing a negative deposit rate.

Meanwhile, the European Commission yesterday hit back at claims that the bailout agreed with Greece contained flaws and should have been done differently.

A spokesman said the EC “fundamentally disagreed” with this week’s admission by the International Monetary Fund (IMF) that mistakes had been made.

An upfront debt restructuring in 2010 would have held significant risks, he argued.