European Central Bank (ECB)
President Mario Draghi on Monday praised Italy's overhaul of its
insolvency regulations, because central bank stimulus measures
must go hand in hand with structural reforms if the economy is
to start moving forward in earnest.
"The recent reform of the law that disciplines the state of
insolvency should be evaluated positively," Draghi said.
The comments come amid a furore over four small troubled
Italian banks that have been saved courtesy of a government
decree, although bondholders in the lenders, including many
small investors, have lost their money.
Draghi also said that unhealthy firms should be not able to
do business.
"The slow pace of the reabsorption of deteriorated loans
prevents the necessary restructuring of the business sector,
with companies reducing their debts and investing while others
exit the market," Draghi said.
The European central banker added that as much as the ECB
is trying to drive the eurozone economy out of the doldrums,
much also depends on each country undertaking structural
reforms.
"Above and beyond current demand, investments depend
largely on business confidence in the future - on how favorable
the conditions might be at the micro level, and on growth at the
macro level," Draghi said.
He added that for example, cutting back on "administrative
and bureaucratic burdens" would also reduce start-up costs and
therefore increase the return on investments.
"Reforms improve demand expectations and encourage
businesses to invest today," the European central banker said.
"At the end of the day, investments are a bet on the
future".
Draghi said in early December that his massive bond-buying
or quantitative easing (QE) program will continue through March
2017 or until eurozone inflation edges up to the 2% area.
The bond-buying program - which is designed to push
interest rates down while boosting credit - was launched January
22 and involves 60 billion euros in monthly bond purchases from
across the eurozone. It was originally slated to end in
September 2016.
Draghi said the QE program will be extended through March
2017 "or as long as necessary", that it would include purchases
of regional and local government paper as well as national
government bonds, and that the ECB will reinvest the proceeds.
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