The President of the European Central Bank (ECB), Mario Draghi, today urged various governments in the euro area, such as Spain, Italy and Greece, to implement the reforms announced in the labor market.
At a press conference, Draghi said that financial markets expect that the governments of some countries in the euro area implement reforms.
The ECB President explained that the governing council unanimously decided to leave official interest rates at 1% and did not discuss changes.
After being asked by the result of the issuance of debt today in Spain, Draghi said that he would not comment on specific cases and referred in general.
The Spanish Treasury placed 2.589 million euros in three issues of bonds with different maturities, resulting in a greater interest in all of them in relation to other auctions and raising the minimum amount in relation to the initial target of 2,500 million and 3,500 million euros.
The recent market reaction “is less an example of fragility of the market, but markets expect that reforms and called on governments to implement reforms,” he said Draghi.
ECB President added that in countries like Spain and Greece, with the highest unemployment rates in the euro area, economic growth must come from external demand, the pulses by low interest rates and reforms in the offer.
Draghi noted the high level of youth unemployment in both countries and urged that reforms be implemented in a dual labor market in a sector that until now had all the protection and another, as young people, nothing, so in the crisis they have been most affected.
In this regard, President of the ECB considered that should produce a more “fair”.
Draghi went further and even said “the European social model must be revised” as is “unsustainable.”
ECB President said Italy has made progress in fiscal and structural reforms, but emphasized that the work is not completed.
Also described as “premature” to talk now about an exit strategy from the extraordinary measures taken in crisis since the record level of unemployment in the euro area.
Unemployment in the euro area in February rose one tenth to 10.8% of the population, a record level not seen for 15 years, with Spain and Greece in the lead with rates of 23.6 and 21% respectively .
ECB President said it will take some time before the two injections of liquidity to three years to take effect on the real economy.
Commerzbank chief economist, Jörg Krämer, said it’s less likely to enter the European monetary authority an exit strategy from the current very expansionary monetary policy, to conduct a new injection liquidity to three years.
“The ECB has become a victim of the success of its liquidity auctions to three years, while reducing the stress level decreases the pressure on peripheral countries implement reforms,” said Kramer.
Commerzbank adds that “without these reforms the sovereign debt crisis is not going to solve and the ECB will be forced to continue funding peripheral countries printing money.”
Draghi predicted that the rate of inflation will be above 2% in 2012.
“We expect that changes in prices remain in line with price stability over the relevant horizon for monetary policy,” Draghi said.
ECB President ruled that some commercial banks in the euro area have become addicted to the injections of liquidity from the Bank.
Draghi he added that “remain the downside risks to the outlook.”
These risks are related to a possible further escalation of tensions in the debt markets of the euro area and its contagion to the real economy.