European Central Bank President Mario Draghi has urged European leaders to clarify their vision for the euro, saying the ECB cannot fill the policy vacuum.
Draghi told the European Parliament the bloc should act quickly to bring an end to the eurozone debt crisis or risk disaster.
He said: “The next step for our leaders is to clarify what is the vision for a certain number of years from now. I think the sooner this has been specified, the better it is. The next question is how do we substantiate this greater clarity? I think that one first step we could take is.. a banking union.”
In his sharpest criticism yet of eurozone leaders’ handling of the crisis, Draghi urged they spell out detailed plans for the euro and fiscal cooperation, something he believes will require governments to surrender some of their sovereignty to succeed.
EU leaders’ have held a series of summits but have so far failed to convince the financial markets they are on top of the problem.
Draghi’s comments will add to growing pressure for dramatic policy action when they meet again next month.
With Spain’s teetering banks threatening to drag it into bailout territory, Draghi said a banking union would carry an important message that the bloc is united in supporting its lenders.
Draghi said a banking union in the region would need to be supervised centrally and require the introduction of a European deposit scheme and a central fund that would cope with troubled lenders.
“The financial crisis has heightened risk aversion in a dramatic way,” he said.
“I urge all governments to keep this in mind, because it is better to err by too much in the very beginning rather than by too little. In bank recapitalisations, in the assessment of needs by banks, it is better to err on the high side.”