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ECB chief: Eurozone needs closer fiscal ties to solve crisis

European Central Bank chief Mario Draghi has called for eurozone leaders to provide a “fiscal compact” if they are to allow the ECB to respond to the growing debt crisis.

Speaking at the European parliament on Thursday, Draghi (pictured) said that binding governments to strong rules on public finances would be the most important element to restoring credibility to financial markets.

According to the FT, Draghi said a fiscal compact would aid confidence in the long term as well as giving markets a short term boost. He also called for eurozone leaders to keep their options open on how economic integration could be implemented as well as not ruling out “far reaching” changes to European Union treaties.

Draghi’s comments come as the ECB plans to speed-up its bond buying programme after a European summit on December 9.

He said: “We have observed serious credit tightening … which, combined with a weakening in the business cycle, does not bode at all well for the months to come.

“The most important thing for the ECB is to repair the credit channel.”

On Thursday, Bank of England governor Mervyn issued his own warning on the economic outlook, stating that the BoE was preparing the UK economy for any break-up of the eurozone.

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There are 2 comments at the moment, we would love to hear your opinion too.

  1. Neil F Liversidge 2nd December 2011 at 9:52 am

    The idea of creating an empire by forcing a disparate and diverse collection of states and cultures to accept central authority does not have a good pedigree. From the empires of the ancient world through the Holy Roman Empire to the Soviet Union and the Third Reich, all have ultimately collapsed and all future empires will likewise collapse, for the same old reasons, changed in appearance only by the advance of technology. Better then not to build them in the first place. Dissolve the EU and the Euro, sack all the Eurocrats and let’s just all get on with pacefully co-existing and trading with each other. Keep in mind that in the long run free trade works, protection does not, and chauvinistic nationalism is a malign and destructive force. The EU started originally as the European Coal & Steel Community, to stop France and Germany ever going to war again over their historic quarrels. It has now served its purpose. We don’t need the empire builders of the EU to bury us in paperwork and regulations. In Cromwell’s words, ‘You have sat too long for any good you have been doing lately… Depart, I say; and let us have done with you. In the name of God, go!’

  2. I do not understand how the solution to countries overspending is for greater fiscal unity. If their own governments can not cut costs and balance that with keeping the economy going, what chance does the EU have of doing a top down austerity drive?

    The Euro never was a credible economic model. The solution to failure is probably not deeper integration!

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