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Mario Draghi issues tough warning to EU members

 

Ap
Thursday 15 December 2011 14:58 GMT
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Mario Draghi said governments must take the tough steps to balance budgets and reform economies to promote growth
Mario Draghi said governments must take the tough steps to balance budgets and reform economies to promote growth (Getty Images)

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European Central Bank president Mario Draghi says there is "no external saviour" for heavily indebted governments in the eurozone debt crisis and gave no sign the bank is ready to step in and support their finances.

Draghi said governments must take the tough steps to balance budgets and reform economies to promote growth.

"I will never tire of saying that the first response should be from government," Draghi said in a speech in Berlin. "There is no external saviour for a country that doesn't want to save itself."

As a "firewall" to calm markets in the meantime, Draghi said, the EU has its newly strengthened bailout fund.

Some economists have urged the ECB to support governments with bigger purchases of government bonds. So far the bank has made some purchases but kept them limited and said the programme is temporary, stressing that governments must not rely on such help from the ECB.

Draghi said that the purchases were "neither eternal nor infinite".

In his speech, Draghi focused instead on the European Financial Stability Facility, the current EU bailout fund, as the "firewall" against the crisis. He urged EU officials to quickly implement decisions to strengthen it to assure markets governments will pay their debts on time.

Governments have agreed on ways to increase the fund's lending power and are seeking outside investors such as countries in emerging markets to contribute to its lending power, so far without much progress.

Economists say the EFSF is too small to bail out Italy, the most recent focus of the debt crisis that has seen Greece, Ireland and Portugal seek bailouts from other eurozone governments and the International Monetary Fund.

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