For Draghi recovery is at risk and regarding Cyprus: “Not a smart move”

The Ecb president on PA debts: “To pay them could help buy several points of the GNP”
He critics the Euro group’s first plan for Nicosia to tax accounts up to 100,000 Euro

The end of the crisis gets further away yet. Or at least the risk is strong: “The forecast of recovery in the second semester is subject to risk of declining.” The President of the European Central Bank, Mario Draghi, advised of the danger in a press conference after the scheduled board meeting of the institute in Frankfurt. For this the ECB, which decided yet again to leave the price of money unchanged, will continue to keep the developments of the Euro zone economy under close observation and be ready to intervene.

Careful though, Draghi warns, because the ECB “cannot compensate for lack of action of the government” in sectors like structural reform that must be “ambitious and long range and must include the industry network, the labor market and the modernization of public administration.” The “most important incentive measure that a country can give – Draghi also suggested which many deciphered as an obvious reference to the situation regarding the fiscal budget of public administration towards Italian businesses – is to return the arrears which in some cases value several points of the GNP.”

From actual experience, according to the governor, the states have much to learn because “one can only realize that a country has an incorrect business model when the crisis explodes.” As such we also need to learn from the mistakes made in handling the Cypriot crisis. Because this is about real mistakes, according to the ECB’s president, who defines the Euro Group’s initial decision which foresaw withdrawals even from bank accounts with less than 100,000, a move that is “not smart.” The problem, he explained, is not to appeal to private citizens to save the banks but “the lack of temporary regulation” that could render it “a disorganized event.”

In any case whoever talks about a possible exit of Cyprus or other countries from the single monetary zone Draghi responds: “The Euro is not a revolving door; it is a European project.” For this “we mustn’t undervalue the importance of the single monetary unit for the people, and not the amount of political capital invested in it either.”

To avoid repeating a crisis like the Cypriot one it is necessary though that the EU “realize a mechanism of resolution, to restructure and recapitalize” the banks, Draghi recommended, highlighting that “those countries where the banking sector is often larger than the economy are more vulnerable to financial trauma which strikes them stronger.”

L. P.