December 2, 2011
European Central Bank President Mario Draghi signaled the bank could ramp up its role battling the debt crisis if euro-zone governments enforce tougher deficit cutting—suggesting outlines are emerging of a deal that investors have been clamoring to see happen.
In his first appearance before the European Parliament since taking the ECB helm last month, Mr. Draghi offered a road map for policy makers. He called on euro-zone governments to quickly craft a "new fiscal compact," calling it "the most important element to start restoring credibility." He added that "other elements might follow, but the sequencing matters."
ECB watchers interpreted his remarks as a possible quid pro quo, suggesting the bank could expand its intervention once governments agree to strengthen the euro zone's budget rules. Within hours of Mr. Draghi's comments, French President Nicolas Sarkozy warned fellow euro-zone leaders that they need to accept what they have long resisted—a tighter union bound by enforceable fiscal rules and the alignment of economic policies—or see dire consequences.
"There cannot be a single currency without economic convergence," he said in the southern French city of Toulon. "Or the euro zone will explode."
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