European Central Bank (ECB) Governor Mario Draghi said Friday that the highly indebted EU States must follow the Stability and Growth Pact. The government of Italy, which has a debt of over two trillion euros, has proposed letting its budget deficit rise to 2.4% of GDP next year. The European Commission has expressed concern that this plan could lead Italy to breach the rules of the Stability Pact.
"In the euro area, in order to reap the full benefits of our monetary policy measures, other policy areas must contribute more decisively to raising the longer-term growth potential and reducing vulnerabilities," Draghi told the meeting of the International Monetary and Financial Committee, in Bali, Indonesia).
"The implementation of structural reforms needs to be substantially stepped up. "The ongoing broad-based expansion also calls for fiscal buffers to be rebuilt. "This is particularly important in countries where government debt is high and for which full adherence to the Stability and Growth Pact is critical for safeguarding sound fiscal positions.
"The transparent and consistent implementation of the EU's fiscal and economic governance framework, over time and across countries, remains essential". On Thursday Reuters reported that several top ECB sources had said the central bank would not come to Italy's rescue if the governments or the bank sector run out of cash unless Rome agrees a bailout from the European Union.
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