Cheap credit cannot solve all Europe's economic problems, European Central Bank President Jean-Claude Trichet said yesterday as he urged governments to raise growth levels.
Mr Trichet said Europe needs a comprehensive economic policy to boost growth and create jobs. He is fending off pressure for a quick cut to official interest rates and attacks on the euro after failed votes on the EU charter.
"It is clear that a good monetary policy cannot deliver all that we are aiming at," he said in Madrid. Governments must pursue market reforms and rigorously implement budgetary rules to raise Europe's growth level, he said ahead of an EU leaders meeting next week to map out a strategy for taking the European Union forward.
The 12-nation monetary region is growing well below 2 per cent and unemployment rising, causing voter anger and mounting calls for an ECB rate cut.
But Mr Trichet and one of his top deputies made clear politicians must act, and low rates can do little more. "We also need a full-fledged economic policy that will care for competitiveness, cost competitiveness and quality competitiveness," Mr Trichet said.
ECB chief economist Otmar Issing, speaking in Munich, said bartering over lower interest rates in exchange for government reforms is not a viable way forward.