Eurozone must agree on “fiscal compact”, Draghi warns

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

Mario Draghi
Mario Draghi

Speaking at the European parliament on Thursday, Draghi 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, Mervyn King, governor of the Bank of England, 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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