World Bulletin / News Desk
The euro single currency area must shore itself up with reforms or face renewed threats of breakup when a new economic crisis strikes, a top European Central Bank official warned Friday.
"Even a small downturn could create large economic and social costs. It could, once again, test the cohesiveness of the currency union," ECB board member Benoit Coeure told a conference in Ljubljana, Slovenia.
GDP growth in 2017 surged to its fastest pace in a decade at 2.5 percent, statistics agency Eurostat said this week.
But "institutional failings that caused and perpetuated the crisis remain unresolved," Coeure warned.
"These are deep-rooted issues that cannot be resolved by a few years of above-trend growth."
The French central banker outlined three "lines of defence" that policymakers should fortify to brace the eurozone against future shocks.
Financial and service industry markets should be more closely integrated across Europe to better absorb potential blows without calling on taxpayer funds, he said, while incentives for national governments to reform their economies while the sun is shining must be rethought.
Secondly, governments must create "fiscal space" -- reducing spending to build up a financial buffer for bad times -- while the European Stability Mechanism, cobbled together during the crisis to lend to stricken states, should have a broader mandate and be turned into a formal Brussels institution, Coeure continued.
Lastly, the euro area "needs a fiscal instrument that can help it cope with large shocks without having to rely excessively on the ECB," he added.
President Emmanuel Macron of France has made creating a eurozone budget controlled by a common finance minister a key plank of his drive to reform the bloc.
And conservative German Chancellor Angela Merkel has sounded cautiously open to such plans as coalition talks come to a head with the centre-left Social Democratic Party.
But there remain deep differences between Berlin, Paris, and other eurozone members about whether a shared budget is necessary or desirable and what it should be used for if created.
Coeure urged at least "visible progress on the first two" of his proposed lines of defence -- in part to spare the ECB from the risk of overstepping its legal bounds.
It has set interest rates at historic lows and bought almost 2.3 trillion euros of government and corporate bonds, fulfilling central bank president Mario Draghi's 2012 promise to do "whatever it takes" to safeguard the single currency.
"Although our actions were bold and unparallelled, we acted within our mandate," Coeure said.
"Without further reforms, the next crisis may well force the ECB to test the limits of its mandate."
Amazon on course to join Apple as world’s only companies worth over $1 trillion
The "informed source" in Iran's oil ministry did not give details of the discount, but sought to downplay the move as common industry practice.
Finance Minister Siluanov terms US dollar a 'risky tool' for payments in international trade
3 banks' net profits stand at $1.95 billion in first 6 months of 2018
Two discuss 'issues on common agenda' of Turkey and Iran
BIST 100 index down 1.35 pct at open with 1,300-point drop from Wednesday's close
BIST 100 climbs 0.17 pct, while Turkish lira gains value against foreign currencies
Banks' reserve requirement limit is lowered by Central Bank
BIST 100 index goes down 0.33 pct, falling over 300 points from previous close
Agency will be formed with partnership from BRICS countries who often face sanctions from West, banker says
Industry minister says new project-based incentive system to contribute in reducing current account deficit by $1.2B
Food and Agriculture Organization food price index falls 3.7 pct in July month-on-month
Yearly increase in consumer prices at 15.85 percent in July, up from 15.39 percent in June, according to official data