Draghi Urges Bond-Buying to “Rebuild” the Euro

Mario Draghi, President of the European Central Bank (ECB), made his case yesterday for a comprehensive bond-buying program as critical to maintain the existence of the euro currency.  Speaking at the European Parliament in Brussels, Belgium on Monday, Draghi noted that the economic situation across Europe “remains fragile and is surrounded by heightened uncertainty.”

As a result, Draghi argued that the ECB “cannot pursue” its mandate of price stability at the present time “with a fragmented euro area because changes in interest rates affect only one country, or two countries at most.”

“They have no importance whatsoever in the rest of the euro area,” he added.  As such, ECB bond purchases provide “a way to comply with our primary mandate.”

“Frankly, all this also has to do very much with the continuing existence of the euro… We have to rebuild the euro area,” Draghi continued. “We have to overcome this fragmentation exactly for pursuing price stability through changes in interest rates.”

While several European nations have made “substantial progress” of late, “we can’t exclude that at some point in time this progress can easily stop because of adjustment fatigue,” Draghi contended. “So that’s why we are asking for conditionality combined with these interventions by the ECB. I think this could stand against the charges that we are doing monetary financing, because we are not doing it.”

Draghi’s comments were contained in a recording obtained by Bloomberg News, a portion of which were reported by AGI, a news agency in Italy.