PARIS (MNI) – Eurozone countries will not see the benefits of
painful austerity programs unless they undertake structural economic
reforms, European Central Bank President Mario Draghi said Monday.
“If you only contract the budget and do nothing else, you will have
a short-term contraction and probably a medium-term recession,” Draghi
said in a meeting with a European parliamentary group in Brussels.
“There is no trade-off between austerity and growth,” he said.
“Austerity creates a short-term contraction. This is avoidable.”
Draghi said that focus of ECB policy was to supply the banking
system was sufficient liquidity to prevent funding and capital problems
from being transformed into a credit crunch.
“The measures that we have taken last week are exactly geared
toward this objective,” he said. “We know that banks are experiencing
and will experience very substantial funding constraints. The whole year
is going to be a difficult year for the banks. We want to avoid a
serious credit tightening that would cause a further slowing in growth
and a recession.”
Draghi said the first quarter of next year will be especially
difficult for banks and bond markets because of the huge among of bank
and government bond debt that will be maturing
–Paris Newsroom, +33142715540; jduffy@marketnews.com
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