The Euro Area countries should "learn to be sovereign together" in order to fulfill the basic needs of growth and job creation for the citizens, European central Bank's President Mario Draghi said Thursday.
The eurozone crisis revealed that the cohesion of the Union depended on the behaviour of each of its members and hence governing structural reforms are necessary along with fiscal policy governance, he said in his speech in honour of late ECB policymaker Tommaso Padoa-Schioppa.
"If some governments retain the ability to stabilise their economies but others do not, then it becomes more plausible that economic divergence will occur. This is one channel through which the cohesion of the Union can be affected. This ability depends on keeping debt low and budget deficits close to zero when output grows at potential, not on having more flexibility in the existing rules." he explained.
The present threats to price stability in the eurozone come from energy and food prices, relative price adjustment in stressed countries, exchange rate behaviour, weak demand and high unemployment, he said.
He referred to the Governing Council's commitment to deal with prolonged periods of low inflation by using "unconventional instruments" and said that they are determined to safeguard the firm anchoring of inflation expectations over the medium to long term.
He stressed that it is important now to enforce the existing fiscal rules to unwind the consolidation that has been achieved. He added that to divest the rules of credibility in doing so, would be self-defeating for all the countries.
Structural reforms play a key role in reducing imbalances in the eurozone countries, he said.
"I would see merits in initiating, as a one-off, a new convergence process within the euro area - one which ensures that all countries are truly in a position to benefit from membership, and that none cause harm to another." Draghi stated.
"Individually, national governments are simply not powerful enough. To serve their purpose, they have to learn to govern together; they have to learn to be sovereign together so as to respond to their citizens' needs." he concluded.
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