The European Central Bank is ready to take fresh action when needed but its monetary policy cannot create real economic growth, which governments need to support with reforms, ECB president Mario Draghi said today.
“In short, the ECB has been very active in responding to the crisis,” Mr Draghi told committees in the French lower house of parliament. “And we stand ready to act again when needed.”
Mr Draghi's comments reinforced his message yesterday, when he tried to douse expectations that the ECB could unwind its crisis-fighting policies after the US Federal Reserve last week set out a plan to slow its bond-buying stimulus.
But Mr Draghi said the ECB could only do so much.
“The ECB has done as much as it can to stabilise markets and support the economy,” he said. “Now governments and parliaments need to do all they can to raise growth potential.”
“Monetary policy cannot create real economic growth,” he added. “If growth is stalling because the economy is not producing enough or because firms have lost competitiveness, this is beyond the power of the central bank to fix.”
The ECB chief pressed governments to do more to support growth by passing reforms.
“These include reducing barriers to entry for new firms and young people, and removing burdens on business like complex tax and labour laws or distortionary regulations,” he said. “Reforms to the labour market are also essential”.
He also pressed governments to push ahead with their plans for a European banking union.
"Banking Union is essential to ensure that we make permanent the progress made in reintegrating financial markets," he said. "It has two indispensable elements: a strong Single Supervisory Mechanism (SSM) and a strong Single Resolution Mechanism (SRM)."