Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Eurozone Needs Overhaul, Ecb Chief Warns Leaders

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Eurozone Needs Overhaul, Ecb Chief Warns Leaders

Article excerpt

FRANKFURT, Germany -- The head of the European Central Bank warned Thursday that the euro currency union is "unsustainable" without stronger political and financial ties, and called for a new course to save it from a crippling debt crisis.

Mario Draghi heaped criticism on European political leaders for being slow to respond to the 2 1/2-year crisis, saying delays and half-measures had only made the situation worse.

Speaking to the European Parliament in Brussels, Mr. Draghi said the central bank has done what it could to fight the problems by reducing interest rates and giving $1.2 trillion in emergency loans to banks. Now, he said, it is up to the 17 member countries to devise a broad vision for the future.

The ECB cannot "fill the vacuum of the lack of action by national governments," he said, urging sweeping reforms to spur growth, cut deficits and create a Europe-wide banking regulator.

Beyond that, the euro needs a fundamental reworking of its rules and management, he said, calling the current structure "unsustainable unless further steps are taken." Europe's leaders need to "clarify what is the vision, ... what is the euro going to look like a certain number of years from now? The sooner this has been specified, the better.

"What we are saying is to dispel this fog," said Mr. Draghi, a plain-speaking Italian and an economist trained at the Massachusetts Institute of Technology.

The blunt diagnosis from the ECB chief came as the eurozone enters another tumultuous period of financial and political instability. Investors are worried that recession-hit Spain will be unable to prop up its banks burdened by toxic bad loans -- and that it will follow Greece, Portugal and Ireland in asking for an international bailout the eurozone can ill afford. These jitters have sent Spain's borrowing costs soaring and stock markets plummeting. …

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