Euro zone risks 'relapse into recession' without structural reforms: Draghi

Fri Oct 24, 2014 2:30pm EDT
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By Francesco Guarascio and Robin Emmott

BRUSSELS (Reuters) - The ECB's president warned divided euro zone leaders on Friday they risked "a relapse into recession" if they failed to press ahead with structural economic reforms, a message welcomed by German Chancellor Angela Merkel.

With a recovery coming to a halt in the second quarter and depressed prices reflecting near record unemployment, France and Italy want to shift away from the spending cuts that marked the bloc's response to the 2009-2012 crisis.

But Germany says debt discipline must continue and the European Commission, which acts as a budget policeman, has until next Wednesday to reject 2015 budgets that fail to comply with EU fiscal rules.

France and Italy are pushing for more spending room in their budgets in return for new commitments on structural reforms, and officials say that any changes Paris and Rome make to their budgets are likely to be small.

Many economists say nothing short of a large scale U.S.-style bond-buying program will revive the economy that is still suffering a hangover from the debt and banking crisis.

But European Central Bank President Mario Draghi told euro zone leaders seated around a large oval table in the EU summit's red marble building that they could not just rely on the ECB.

"We avoided the collapse of the euro with a joint effort. Now our focus should be to act jointly again to avoid a relapse into a recession," Draghi said, according to his spokesman, who quoted from his speech. "Hope is not a strategy."

He said a coherent plan for economic growth had to involve "concrete and credible" structural reforms.   Continued...

European Central Bank (ECB) President Mario Draghi (R) talks with France's President Francois Hollande as they arrive for a working session during an EU summit in Brussels October 24, 2014.   REUTERS/Christian Hartmann