Eurozone must be transformed, warns ECB chief Draghi
The ECB cannot "fill the vacuum of the lack of action by national governments" in those areas
European Central Bank chief Mario Draghi has told EU leaders that the Eurozone set-up is unsustainable.
He warned they must quickly come up with a broad vision for the future to get the bloc through the financial crisis.
Mr Draghi said today that the crisis had exposed the inadequacy of the financial and economic framework set up for the euro monetary union launched in 1999.
"That configuration that we had with us by and large for for ten years which was considered sustainable, I should add, in a perhaps myopic way, has been shown to be unsustainable unless further steps are taken," he said in response to questions in the European Parliament.
Mr Draghi said the central bank had done what it could to fight the debt crisis by reducing interest rates and giving one trillion euro (£800 billion) in emergency loans to banks.
But it was now up to governments to chart a course ahead by reducing deficits, carrying out sweeping reforms to spur growth and by strengthening the euro's basic institutions. The ECB cannot "fill the vacuum of the lack of action by national governments" in those areas.
He said the next step "is for our leaders 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 it is."
He likened Europe's current struggles to those of a person crossing a river in thick fog while struggling against a strong current.
"He or she continues fighting but does not see the other side because it is foggy. What we are asking is, to dispel this fog," he said.
European officials have worked to strengthen rules against piling up debt and to tighten surveillance over countries' budgets and economies. More wide-ranging measures - such as a common finance ministry or shared borrowing through so-called Eurobonds - have not found agreement.
Mr Draghi said one first step would be to impose tighter central control over banks through a banking regulator that could force banks to restructure and take over the burden of bailing them out. The European Commission announced plans for such a "banking union" today.
Banks have been a key part of the government debt crisis. Bank bailouts are a further burden on financially shaky governments, and weak government finances in turn hurt the banks that hold those governments' bonds.
Currently, most powers to regulate banks have been left with national authorities, who have been seen as protective of their domestic financial services industries. The EU's existing regional regulator, the European Banking Authority, has limited powers.
MR Draghi said bailouts for Bankia in Spain, and before that Dexia in Belgium, show that national regulators are reluctant to admit the extent of troubles at home. That only has the effect of raising the end costs of rescuing the banks and undermining trust and transparency, he said.