Europe's chief banker says the current operation of the 17-nation euro currency bloc is "unsustainable" and that it must create a new vision of how it will manage its affairs in the coming years.
The head of the European Central Bank, Mario Draghi, said the financial institution has done what it could to combat the eurozone's two-year government debt crisis. But he told the European Parliament in Brussels on Thursday that the currency union's individual countries needed to strengthen the eurozone's structure to control spending and boost Europe's stagnant economy.
He said the way the eurozone has evolved since its 1999 founding "has been shown to be unsustainable." Draghi called for a new eurozone mandate.
"The next step is to basically for our leaders really to clarify what is the vision for a certain number of years from now. How is he euro going to be, to look like in a certain number of years from now? What is the union vision that you have a certain number of years from now? And I think the sooner this is specified the better it is," he said.
The bank chief said that too often European leaders had taken half-steps in attempting to deal with the debt crisis, such as in the recapitalization last year of the Franco-Belgian bank Dexia and now the $24 billion bailout of the debt-ridden Spanish bank Bankia.
"I think what Dexia shows, and Bankia shows as well is that whenever we are confronted with the dramatic need to recapitalize, if you look back, the reaction of the individual governments, countries, supervisors, national supervisors is first to say, underestimate the importance of the problem, then come out with a first assessment, then a second, then a third, then a fourth, and this has been the experience I would say everywhere," he said. "If you look at it, all countries have done exactly the same thing. That is the worst possible way of doing things, because you end up, obviously everybody ends up doing the right thing but at the highest possible cost and price, so I think I urge really all governments to keep this in mind, that it's better to, in a sense err because of too much at the very beginning, rather than err by saying too little."
The eurozone is facing several imminent problems, the chief of which is whether economically troubled Greece stays in the currency bloc or becomes the first to leave it. Greece's mid-June parliamentary elections have effectively become a referendum on its eurozone membership.
Meanwhile, the Madrid government is struggling to figure out how to finance its takeover of Bankia, beset by billions of dollars in unpaid real estate loans.
In Washington, International Monetary Fund chief Christine Lagarde was set to meet with the deputy Spanish prime minister, Soraya Saenz de Santamaria, about the country's economic plight. The IMF said there are no plans for a Spanish bailout. But a business newspaper, the Wall Street Journal, reported that the IMF's European division has started to develop contingency plans in case Spain needs funds to complete the bank takeover.
Some information for this report was provided by AP, AFP and Reuters.