AMSTERDAM — European Central Bank head Mario Draghi said Monday that it was up to politicians to solve the region's core problems including fixing the banking system and improving long-term growth.
Draghi said in a speech delivered in Amsterdam that the central bank had given governments time to change things by warding off an environment of "panic and fire sales" by investors through its emergency measures — but it couldn't finish governments' work for them.
The ECB's steps included launching €1 trillion ($1.3 trillion) in cheap, three-year loans to banks to steady their finances and helping lower the borrowing costs of indebted countries by offering to buy government bonds on the open market.
Nonetheless, the economy of the 17 European Union countries that use the euro is mired in recession and is suffering from record unemployment. Meanwhile, borrowing conditions across the eurozone are fragmented: Companies in the indebted countries are paying more to borrow due to troubled government and bank finances than their more financially stable neighbors.
He said governments must pass structural reforms to make their economies more competitive and business-friendly, such as easing rules on hiring and firing people. The aim would be to improve growth that would, in turn, boost tax revenues and help governments shrink debt long-term.
"To conclusively address the root causes of the crisis these efforts need to be maintained and, in some countries, stepped up," he said.
"Let me be clear: undertaking structural reforms, budget consolidation and restoring bank balance sheet health is neither the responsibility nor the mandate of monetary policy."
Draghi did not appear to rule out further emergency actions by the central bank but gave little hint what those could be. He has talked about looking for ways to ease borrowing conditions for the small and medium-sized businesses that employ most people.
He did mention so-called quantitative easing efforts by other central banks such as the U.S. Federal Reserve and Bank of Japan to purchase of securities from banks. This adds new money to the economy and can drive down longer term interest rates.
However, he said, those policies were "tailor made" for those large single economies. Introducing such a scheme across the 17 countries of the eurozone would be complicated and Draghi warned there was "no uncontroversial way" to determine what the target interest rate would be. It's also unclear how the bank would decide which countries' bonds to buy.
The ECB has already cut interest rates to a record low 0.75 percent — but this is still higher than rates set by the U.S. Federal Reserve and the Bank of England. Analysts have not excluded a further cut.
Draghi in particular urged quick action to set up a single European authority that can wind down busted banks and protect euro member governments from heavy losses.
Troubled banks have contributed to the bloc's three-year debt crisis. Most recently, they helped pull down the public finances of Cyprus, which became the latest eurozone country to need a bailout.
Draghi said such an authority would wind up banks "without reinforcing the vicious link between banks" and government finances.
European leaders have said they intend to set up such a resolution authority but action on the proposal has lagged.
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McHugh contributed from Frankfurt, Germany.
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