EUROPEAN UNION (OBSERVATORY) – The euro area needs a new, common “fiscal instrument” to keep its member countries together, even when they are being attacked in financial markets, said European Central Bank President Mario Draghi.
It is expected that the leaders of the European Union, which will meet next month, will make gradual progress on some unresolved issues in the bloc, such as general support for providing cash to banks that are currently experiencing shortages.
Speaking at the event in Florence, Draghi supported this step and also called for the creation of a tool supported by the government, which is intended to help weaker countries if they are excessively “punished” by investors during the debt crisis.
“We need an additional financial instrument to maintain convergence during major shocks, without the need to overload monetary policy,” Draghi said.
“Its goal is to provide an additional level of stabilization, thereby strengthening the credibility of national policies.”
Draghi’s proposal contained few details, and he acknowledged that any such document was “conceptually not easy to develop”, including because of the EU rules on the financing of governments.