ECB President Mario Draghi: Without Reform There Can Be No Recovery

“We are accountable to the European people for delivering price stability, which today means lifting inflation from its excessively low level; and we will do exactly that,” said Mario Draghi, president of the European Central Bank, in a speech yesterday at an event hosted by the Hutchins Center on Fiscal and Monetary Policy at Brookings.

President Draghi continued in his remarks that:

The Governing Council has repeated many times, even as it was adopting new measures, it is unanimous in its commitment to take additional unconventional measures to address the risk of a too-prolonged period of low inflation. This means that we are ready to alter the size and the composition of our unconventional interventions and therefore of our balance sheet as required.

Draghi, who was joined on stage by Senior Fellow David Wessel, director of the Hutchins Center, and Stanley Fischer, vice chairman of the Board of Governors of the Federal Reserve, began his remarks by recalling an open letter delivered by economist John Maynard Keynes to President Franklin Roosevelt in December 1933, in which the economist worried about the risk of too-fast reform impeding economic recovery. However, Draghi noted, “we [in Europe] face the opposite concern to that expressed by Keynes. Without reform, there can be no recovery.”


Draghi then outlined what he called a “coherent strategy” of structural reform and policy initiatives to “stabilize the euro area” and to “achieve a sustained recovery.” He discussed actions on a number of fronts, including: repairing the integrity of money; repairing the financial sector and credit allocation; repairing monetary policy; repairing fiscal policy; and raising potential growth through a rising workforce and rising productivity.

“The issue is not really whether policies to support demand should precede or follow policies to support supply,” Draghi said in conclusion. “Reform and recovery are not to be weighed against each other. The whole range of policies I have described aims simultaneously at raising output towards its potential and at raising that potential.”

During the discussion, Vice Chairman Fischer observed that what Europe is trying to do is very difficult, over a relatively short time scale. “At various stages,” he said, “people [in the U.S.] were confident that the European Monetary Union would at least start losing members if not collapse. That’s not happened. It’s gaining members.”

What Europe is trying to do is undertake a very long-term project in a relatively short time. I think this process of creating a national economy took the United States 150 years. Well, the clock moves more rapidly these days. But they’re still trying to do a whole lot of things together, and they’re doing better than most of us would have said at each stage when they began the next stage. And I hope that continues to be true.

Watch the full event video for his complete remarks and the discussion that followed:

Learn more about the event here, and about the Hutchins Center on Fiscal and Monetary Policy here.