Draghi tells Eurozone leaders to focus on pro-growth reform

City A.M. Reporter
THE EUROZONE’S governments need a “growth compact” to boost their economies, European Central Bank (ECB) boss Mario Draghi said yesterday, as the bank revealed its €1 trillion (£818bn) cash injection has not helped lending as much as first thought.

There are growing expectations in financial markets that the ECB will have to ride to the rescue again with Spain under intense pressure, the Dutch government having collapsed over budget plans and the latest data showing the Eurozone is being driven back into recession.

However, the word from the currency bloc’s central bankers is very different – having pumped banks full of cheap money through its three-year long term refinancing operations (LTROs) in an effort to avert a credit crunch, the ECB says governments and banks have been given space to cut debt and clean up balance sheets.

Draghi called for Eurozone states to pursue growth-enhancing structural reforms.

“We’ve had a fiscal compact. Right now what is most present in my mind is to have a growth compact,” he told the European Parliament, calling for this to be founded on Europe’s “six pack” of tighter budgetary rules.

He also pressed leaders to pursue structural reforms to help generate this growth, saying the ECB’s contribution was to deliver stable prices.

“Are we doing all we can for growth? Our task is not that. Our task is to ensure price stability and through this contribute to growth. That’s what I think we are delivering,” he told MEPs.

Meanwhile the ECB’s quarterly lending survey showed a small improvement in the supply of credit since the LTROs took place, but a lack of demand to take it up.

A net balance of 30 per cent of banks reported falling demand for business loans, as investment is falling across the currency area.

ECB’s Draghi wants to boost lending