Failure to make economic reforms and shield weaker members could damage the “essential cohesion” of the eurozone, the head of the European Central Bank said yesterday, in a blunt warning to political leaders.
In unusually frank language, Mario Draghi urged countries across the 18-member currency bloc to consider alternative ways to support struggling members, warning of the perils were fears to grow about those countries quitting the euro.
“Lack of structural reforms raises the spectre of permanent economic divergence between members,” Draghi said. “And insofar as this threatens the essential cohesion of the Union, this has potentially damaging consequences for all ... members.”
Draghi’s remarks were not limited to economic reforms in individual countries but also to a wider rethink of some of the basic principles underlying the bloc, such as the mechanisms for countries to help each other.
The message comes less than a week after he pledged to take further steps if needed to shore up the eurozone’s flagging economy and weeks ahead of a meeting of European leaders in Brussels to consider measures to bolster growth in the region.
Unlike the United States, the eurozone does not have a system of ‘fiscal transfers’ by which richer members such as Germany can aid poorer states such as Greece.