Reforms should promote growth for all – ECB chief
EUROPEAN Central Bank (ECB) president Mario Draghi has said governments should ensure that pro-business reforms created economic benefits for everyone if the changes in worker protections were to find acceptance.
Draghi said yesterday that a perception that growth was not benefiting everyone had “fuelled the belief that some have been ‘left behind’ by the spread of market forces”.
He said countries that loosened worker protections and made hiring more flexible for companies also needed to take steps to make jobs more secure and to retrain workers.
Draghi called repeatedly for countries to step up so-called structural reforms: to reduce bureaucracy, red tape and excessive rules governing business and hiring.
He has said the ECB’s support for the economy through its stimulus programmes gave them a “window of opportunity” to act. He conceded that the costs of reforms – often short-term – had led some to regard structural reforms as “a bad word.”
Debt crisis
He said countries that did engage in such reforms during the eurozone debt crisis – such as Spain, Portugal and Italy – had seen unemployment fall.
He warned, however, that sometimes making job relationships more flexible led to poorer labour deals for young people, and that labour reforms should also address workers’ needs for security.
Draghi spoke at an economic conference convened by the ECB, which conducts monetary policy for the 19 countries that use the euro, to explore how to promote economic reforms in the bloc.
While the central bank has pushed for reforms in its public statements, Draghi is careful about mentioning specific countries because of the ECB’s status as a politically independent institution whose leaders are appointed, not elected. Pro-business reforms are getting attention in Europe because France’s new president, Emmanuel Macron, is taking steps to loosen France’s labour protections. But the topic cuts across the entire eurozone economy.
Italy’s clogged courts make it hard to resolve bankruptcy claims and contract disputes.
Even Germany, with low unemployment and strong growth, has come in for criticism about restrictions on competition among some service providers.
Draghi did not address the future of the bank’s stimulus programmes, such as its €60 billion (R944bn) per month in bond purchases and zero benchmark interest rate. Decisions on a phase-out of the bond purchases are expected at the next ECB rate meeting on October 26.
The central bank’s support for the economy seen as a ‘window of opportunity’ to act.