European Central Bank President Mario Draghi is telling eurozone government they have to keep control of their spending, and particularly the countries with lots of debt must push on with budget reforms.
But – responding to worries about the effects of austerity – he did warn that governments should mitigate the impact of that austerity on growth.
He told an audience at Luiss University in Rome: “In this context, the struggle to come up with a common response to the sovereign debt crisis has had a negative effect in terms of how the market financial markets see us. But now, we’ve reached the point where – for the process of European monetary integration to survive – we needs a ‘growth compact’ together with the ‘fiscal compact’.
Along with underlining the positive impact of expansion policies, Draghi said there can be no prospect of sustainable growth without sound public finances.
He also repeated the ECB is ready to cut interest rates again if needed after reducing them to a record low of half a percent last week. That pushed the value of the euro down against the dollar.