Draghi urges Germans to support euro rescue plan

Aug 29, 2012, 7:18 AM EDT
European Central Bank President Mario Draghi seen at a conference in Frankfurt, August 2, 2012.
Foto AP/Michael Probst

FRANKFURT, Germany (AP) — European Central Bank head Mario Draghi urged skeptical Germans to support efforts to rescue the euro, saying the currency's original setup may have been flawed but that fixes are within reach — and shouldn't mean Germany will always pay for less well-managed countries' troubles.

In a newspaper article, Draghi stressed that as an exporter deeply integrated into the global and eurozone economies, Germany needs a strong, stable euro. He said there were ways to repair the 17-country currency union without creating a political federation or "United States of Europe" that would involve richer countries such as Germany constantly sending money to laggards that have overspent or mismanaged their economies.

European officials can take less drastic steps, such as establishing stricter central oversight of national spending and tougher scrutiny of banks, he said.

Draghi argued that that the euro's original 1999 setup — one currency shared by countries that only loosely coordinate their spending and economies — has been discredited by the debt crisis that has seen Greece, Ireland and Portugal run up heavy debts and need bailout loans from the other countries.

While the euro was launched as "a currency without a state" to preserve the independence of member countries, Draghi said the debt woes have shown "this institutional framework left the euro area insufficiently equipped to ensure sound economic policies and effectively manage crises."

He advocated a calm discussion of the "minimum requirements" to complete the monetary union, including more central EU control over spending by individual countries and tougher scrutiny of problem banks.

"We need true oversight over national budgets," he said. "The consequences of misguided fiscal policies in a monetary union are too severe to remain self-policed."

Draghi's article for the highbrow German weekly Die Zeit, made public Wednesday, comes as European officials prepare for their next steps to try to quell the crisis in coming weeks. The ECB has said it could launch an effort to buy government bonds that would lower borrowing costs for troubled governments, so long as those governments ask for help from the eurozone bailout fund and agree to take steps to cut their deficits.

Germany public opinion is key because the country is the biggest backer of financial rescues. Chancellor Angela Merkel has indicated she's open to the ECB's plans and has publicly admonished members of her governing coalition to tone down angry remarks about Greece. A top German official on the ECB executive board, Joerg Asmussen, has also publicly backed the bond purchase plans.

Germany's Bundesbank central bank and its head, Jens Weidmann, remain opposed, however, with support from many of Germany's academic economists, conservative politicians and voters.