Draghi dials R for Reform. Line is busy

Fri Aug 29, 2014 5:45am EDT
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By Paul Carrel

FRANKFURT (Reuters) - Two years ago, euro zone government leaders hung on Mario Draghi's every word. Now the European Central Bank chief is struggling to get through to them. What has happened to 'Super Mario's' mojo?

For financial markets, Draghi's words still count. But therein lies a problem - his promise in 2012 to do "whatever it takes" to save the euro has reassured investors and driven down government borrowing costs to near record lows.

Euro zone governments, however, seem to have forgotten the caveat.

Draghi delivered his famous "whatever it takes" speech, and backed it up with a plan to buy "unlimited" amounts of bonds issued by stricken euro members - but only after governments agreed to his call for a "fiscal compact" on tougher budget discipline.

Now he is trying to cajole governments into agreeing a common approach to reforming their economies - a drive he sees as necessary to allow the stagnant euro zone to grow with verve.

"The essential cohesion of the (European) Union depends on it," Draghi said in July, repeating the plea on Aug. 7.

He is having a hard time selling the message.

Like a groom dieting for his wedding day, many euro zone countries shaped up to gain entry to the euro zone, only to let themselves go once that big day was behind them.   Continued...

European Central Bank (ECB) President Mario Draghi speaks during the bank's monthly news conference in Frankfurt August 7, 2014. REUTERS/Ralph Orlowski