Draghi urges euro zone states ‘to be sovereign together’

European Central Bank President Mario Draghi urged euro zone states to respect their joint fiscal rules and extend their cooperation to economic reforms, telling governments they must "learn to govern together".

While reiterating his message that the ECB is ready to use “unconventional instruments” - code for large-scale asset buying - if needed, he devoted most of a speech in London to pressing for closer European integration to deliver growth and jobs.

Mr Draghi, who brought the euro zone back from the brink of break-up in 2012 with his pledge to do “whatever it takes” to save the euro, called on countries to respect the EU’s Fiscal Compact on reducing public debt.

“What is essential now is that these rules are enforced,” he said in the text of his speech, a memorial lecture on Wednesday in honour of the late Italian minister and ECB policymaker Tommaso Padoa-Schioppa.

“To unwind the consolidation that has been achieved, and in doing so to divest the rules of credibility, would be self-defeating for all countries,” Mr Draghi said.

His comments come as euro zone policymakers debate the flexibility of their fiscal rules, with Italian prime minister Matteo Renzi leading calls to move from austerity to expansion.

Mr Draghi appeared to push back: “Fiscal rules should be viewed in the national debate as promoting growth-friendly fiscal consolidation and not simply as a painful accounting exercise.”

The ECB president added that high debt made countries more vulnerable in the event of financial shocks.

Furthermore, only by showing a willingness to respect common fiscal rules could euro zone states achieve the mutual trust that is a pre-requisite for integration in other areas, he said.

Pressing for closer integration, Draghi urged euro zone states to align their approach to structural reforms - efforts to shape up economies by, for example, liberalising labour markets - using the template of the common fiscal rules.

"There is a strong case for us to apply the same principles to the governance of structural reforms as we do to fiscal governance," he said. "The essential cohesion of the union depends on it." - Reuters