European Central Bank president Mario Draghi yesterday warned euro zone countries that they must continue to implement structural reforms despite pleas from countries such as France for greater budget flexibility.
Mr Draghi was speaking two days after France announced it would again miss its budget deficit target set by the European Commission, pledging to reduce its deficit to 3 per cent of GDP by 2017, having previously been granted an extended deadline of 2015.
"To see investment return we need to see more ambitious structural reforms," Mr Draghi said after yesterday's meeting of euro zone finance ministers in Milan, a view that was echoed by the interim European commissioner for economic affairs Jyrki Katainen.
“Without reforms, we won’t have growth,” said Mr Katainen. “No country is immune from challenges to reform.”
France’s repeated failure to meet budget targets set by Brussels was a theme of yesterday’s meeting of euro finance ministers, which also discussed and endorsed Ireland’s plan to repay its IMF bailout loans early.
Annual budget
France, along with the other 17 euro zone economies, is currently preparing its annual budget which will be sent to the European Commission for approval next month.
Centre-left governments including France and Italy have been pushing for greater flexibility in terms of the implementation of the EU's stability and growth pact, a position that was boosted by Mr Draghi's comments in Jackson Hole last month in which he appeared to back a move towards greater flexibility in budget rules.
However Mr Draghi used his monthly press conference in Frankfurt last week to clarify that fiscal reforms were also necessary to ensure economic growth, despite unveiling a new loan-purchasing programme and a fresh interest rate cut.
Growth stalled
The euro zone economy has slowed in recent months, sparking fears
the bloc could be facing into a period of low growth and low inflation.
Pointing out that growth had stalled in the second quarter following four consecutive quarters of growth, Mr Draghi said yesterday: “We still think the recovery will proceed at a modest pace. As I’ve said many times, the recovery is fragile uneven and weak, but we see it continuing.”
Asked to specify further details of the proposed asset-backed securities programme announced this month, Mr Draghi declined to give an estimate on the figure.
“We know it’s going to be big, but we are hesitant to give a number now.”
Further details of the measure are expected at next month’s rate-setting meeting, which will take place in Naples.
