Tuesday, 27 September 2016

Draghi called States for delivering and respecting rules

«Monetary policy alone is not enough», said the president of the European Central Bank. «Trust is essential». Warnings to Italy

by Emiliano Biaggio

Rules have to be respected. This means structural reforms have to be delayed, new additional deficit is not allowed. This means also Italy has to deliver rather than complain. The president of the ECB, Mario Draghi, stressed yesterday national government have to do more, in the respect of the existing framework. All the instruments to boost economy are there, according to the chief of the European Central Bank. On the contrary, political will is still lagging behind. And a change in this sense is needed.

Member States have to act
«The monetary policy of the ECB served to limit the negative effects of the shock, but monetary policy alone is not enough to deliver growth», pointed out Draghi in the European Parliament. «Other policy actors need to do their part, with growth-friendly fiscal and structural policies which will contribute to a self-sustaining recovery and increase the economic growth potential». It is not the first time Draghi calls the EU Member States to do more. He has been repeating it since he took office, in 2011. Once again, Member States have been invited to act.

Respecting the rules
«It's important rules are respected». Draghi made clear neither deviations nor derogation from current legal framework are possible. He recalled that «for further European integration to be feasible and acceptable, trust among its nations and people is essential». As a consequence, «to bolster such trust, it is important that agreed rules are respected». In this sense, according to the ECB chief is good to keep in mind that «in the existing rules there's many flexibility». A clear warning to Italy, even though he didn't do any explicit reference.



Fiscal spaces
Previously this month Draghi said «countries that have fiscal space should use it». Nothing but a suggestion. In fact yesterday he clarified «while countries without fiscal space can't spend, countries with fiscal space are not compelled to use it». Once again, Draghi sent messages to certain Member States without mentioning them. The Italian prime minister wants to increase Italy's 2017 budget deficit, in defiance of EU rules, to spend more money on cutting taxes, increasing pensions and tackling immigration. Italy has not such a fiscal space. Germany has fiscal space but is has not used yet. Who is acting within the rules is clear. Another warning to Rome.

Brexit
The extent to which the economic outlook will be affected «depends on the timing, development and final outcome of the upcoming negotiations». That means Brexit has to happen soon, as quick as possible. In the future relationship between the European Union and the United Kingdom, «it is of utmost importance that the integrity of the single market is respected». It is important that «any outcome should ensure that all participants are subject to the same rules».

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