The European Central Bank wants Greece to remain in the euro zone while the decision for Greece’s possible exit from the currency union isn’t an issue that the ECB would need to decide on, ECB President Mario Draghi said Wednesday.
This was the first time the ECB’s head commented on Greece since inconclusive elections unseated the government there recently, leading to worries that the country may leave the euro zone.
“Since the treaty doesn’t foresee anything on exit, this is not a matter for the ECB to decide,” Draghi said.
The ECB wants Greece to remain in the euro zone, but it won’t sacrifice its inflation mandate and balance sheet to keep it in, Draghi made clear.
“While the ECB will continue to comply with the mandate of keeping price stability over the medium term in line with treaty provisions and preserving the integrity of our balance sheet, I want to state that our strong preference is that Greece will continue to stay in the euro area,” Draghi said at a conference in honor of executive board member Jose Gonzalez-Paramo, whose eight-year term will expire at the end of May.
The ECB defines price stability as an inflation rate of less but close to 2% in the medium term.
Market anticipation of the ECB deciding on some unconventional policy steps at a routine governing council meeting Wednesday heightened after the funding costs of Spain and Italy increased sharply due to Greek worries.
Draghi didn’t announce any more such measures Wednesday, but reiterated that the unconventional measures already in place have served to improve the effectiveness of the ECB’s monetary policy and were a response to the dysfunction of money markets.
He reiterated that the ECB will remain committed to its price stability mandate–a statement which can be interpreted as an avert rejection of straightforward government financing by the central bank.
Without singling Germany out by name, Draghi said the ECB’s monetary policy can’t address inflation rates of individual countries in the euro zone.
Public debate in Germany flared up recently about its inflation rate as its central bank, the Bundesbank, and various politicians have said they would tolerate higher inflation as that would help reduce economic disparities–large trade and current account imbalances–within the euro zone.
Countries which have lost competitiveness due to their high wage costs in comparison with their euro-zone peers need to regain competitiveness though cost moderation, productivity gains, and technological change, Draghi said.
Greece and Italy are among the countries that are facing competitiveness issues, ECB central bankers have said.
“…relative competitiveness adjustments can and need to occur at the country level. These adjustments need to be driven by national policies,” Draghi said.