UPDATE: ECB's Draghi calls for rules on economic reforms
By Paul Hannon
European Central Bank President Mario Draghi on Wednesday called for a new set of rules for euro-zone members that would apply to economic reforms and be analogous to the standards that govern borrowing by governments.
In outlining a new proposal from the ECB that would further deepen the economic integration of the euro zone, Mr. Draghi said differences in the competitiveness of its 18 member economies are as much a threat to its survival as differences in their debt loads.
The ECB has long called for greater structural reform of euro-zone economies to narrow the differences between their economic performance, but in a speech in London, Mr. Draghi gave the clearest outline yet of a governance structure that would help bring that about.
While the euro zone's crisis was triggered by the inability of some of its member governments to borrow on international bond markets because their debts had grown too large, many economists and policy makers believe that reflected more deep-rooted economic differences. Specifically, they said businesses and workers in those countries most affected by the crisis had lost their ability to compete with their counterparts elsewhere in the currency area, leading to large current-account deficits that were financed through foreign borrowing.
Mr. Draghi noted that while the World Economic Forum ranks euro-zone member Finland third in the world in terms of competitiveness, Greece ranks No. 91. Similarly, he noted that the World Bank ranked Ireland 15th in the world for ease of doing business, while it ranks Malta at No. 103.
"No firm or individual should be penalized by its country of residence," he said. "The persistence of such differences creates the risk of permanent imbalances. With this in mind, I believe that structural reforms in each country are enough of a common interest to justify that they are made subject to discipline at the community level."
Mr. Draghi said establishing new rules that would require member governments to take "corrective action" to improve the competitiveness of their economies would strengthen the cohesion of the currency area and help boost growth and create jobs.