Draghi: Sovereign debt must act as safe haven in times of economic stress

FXStreet (London) - Speaking at the University of Helsinki, European Central Bank president Mario Draghi has continued to reinforce his view on the need for great fiscal integration alongside monetary union.

At the event organised by the Finnish central bank, Draghi stated that: “Sovereign debt must act as safe haven in times of economic stress by a strong fiscal governance framework and by some form of backstop.” He added that as a result, the importance of each country abiding by its commitments under the Stability and Growth Pact should therefore be “beyond debate.”

Draghi added that he welcomed the European Commission’s new proposal tp stimulate investment spending in Europe, but that “no form of stronger governance can entirely remove the risk of self-fulfilling liquidity crises” and that it would be natural over the longer term to “reflect further on how to always preserve the ability to use fiscal policy counter-cyclically”, something that Draghi said could only take place in the context of a decisive step towards fiscal union.

The comments from the ECB president come ahead of the ECB’s monetary policy decision on 4 December.