Draghi: No Favours for UK in leaving EU

PUBLISHED : Tuesday, 27 September, 2016, 7:50am
UPDATED : Tuesday, 27 September, 2016, 7:50am

Mario Draghi said the UK shouldn’t be granted any special favours on single-market access during negotiations over its exit from the European Union.

“Any outcome should ensure that all participants are subject to the same rules,” the European Central Bank president told European Parliament lawmakers on Monday. “It is very hard to imagine that any agreement that will be perceived as discriminatory against some subjects or in favour of other subjects could be a source of stability for the future of our EU.”

Since the Brexit referendum on June 23, the UK government has been trying to work out whether it can retain access to the single market without accepting all of its conditions, most notably the free movement of labour.

Poland, the biggest exporter of workers to the UK, last week joined a chorus of voices from the EU’s eastern nations in signalling it may veto any agreement that would erode the rights of its citizens to live and work throughout the bloc.

Draghi said that while the ECB doesn’t have an official role in the Brexit negotiations, it could act in an advisory capacity. He also noted that the central bank has jurisdiction over the payment system and that there may be a need to consider changing the regulatory framework for the planned capital markets union.

His comments came as he urged governments to act to stem rising public discontent, in his latest warning that monetary policy can’t sustain the region’s recovery alone.

“Europeans are calling on our institutions to bring tangible benefits to their everyday lives,” he said in the testimony in Brussels. “Actions by national governments are needed to unleash growth, reduce unemployment and empower individuals, while offering essential protections for the most vulnerable.”

Draghi has grown increasingly vocal in his calls for elected politicians to boost spending and reform their economies as the ECB struggles to stoke inflation. The central bank’s programme to buy 80 billion euros (US$90 billion) a month of debt faces scarcity concerns and its negative interest rates have prompted criticism by banks and savers.

“Low rates are a symptom of the underlying economic situation,” Draghi said, while adding that their implications must be carefully monitored . “Other policy actors need to do their part.”

Executive Board member Benoit Coeure addressed the topic earlier in a speech in Rome, where he said the EU is going through a “difficult phase” and that national governments need to live up to their responsibilities.

“If fiscal and economic policies do not in fact play this role, we risk being trapped in a low growth, low interest-rate equilibrium,” Coeure said. “Moving from interest rates being ‘low for long’ to being ‘low forever’ would severely limit the room for manoeuvre for conventional monetary-policy tools but, even more worryingly, it would threaten the contract between generations as well as risk tearing up our social fabric.”

Policy makers are so worried about the slow pace of structural adjustments that they’ve created a task force on economic reforms.

Draghi said officials will be “exploring the interactions” of different concepts, and that’s it doesn’t have a mandate to make specific recommendations to governments.