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Draghi says Europe needs growth pact

Associated Press Modified: April 25, 2012 at 3:01 pm •  Published: April 25, 2012
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FRANKFURT, Germany (AP) — European Central Bank head Mario Draghi gave a muted outlook for the European economy and called for a "growth compact" to restore lost competitiveness across Europe.

Draghi's remarks Wednesday follow a backlash in Europe against austerity and deficit measures that were introduced to help the 17 countries that use the euro deal with the debt crisis that is hitting the region.

"We have had a fiscal compact," Draghi said, referring to the treaty signed in March by European governments tightening rules on government spending. "What is most present in my mind now is to have a growth compact."

The ECB president's comments — which weren't accompanied by extensive explanation or details — alluded to efforts to introduce long-term structural reforms to make countries more business-friendly. Those measures include making it easier to fire longtime workers and to start a business.

Draghi, however, did not take a stance against governments working to cut the size of their deficits, describing that step as "unavoidable."

Speaking to the economic and monetary affairs committee of the European Parliament, Draghi said the package of fiscal and economic measures recently agreed by the European Commission, the EU's executive, and the European parliament could pave the way for a formal eurozone agreement on growth.

"And so we have to go back and make it a compact," he said. "That's very very important."

Draghi's push for a growth agreement has caused some interest among analysts and politicians because it was his earlier call for a "fiscal compact" that eventually led to the European governments' current fiscal treaty.

Draghi added that economic indicators confirm "a stabilization in economic activity at a low level" and referred to "an environment of modest growth" in the euro area. But he indicated demand for credit — a key sign of economic activity — remained weak.

The EU's executive commission predicts the 17-country eurozone will see their economy shrink by 0.3 percent this year, and recent surveys of purchasing managers in industry and service suggest that the economy might even fall short of that.

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