* ECB cannot fix euro zone alone: Eurogroup's Dijsselbloem
* ECB's Draghi: reform a must, countries have homework to do
* Governments need to move together within existing rules
* Dijsselbloem sees room for public investments, lower taxes
* For graphic on ECB interest rates, inflation & the euro:
(Adds ECB's Draghi, writethrough)
By Martin Santa and Eva Taylor
BRUSSELS/FRANKFURT, Sept 4 The leaders of the
European Central Bank and the euro zone finance ministers' group
told governments on Thursday the only way to get their economies
growing was to make them more competitive.
The ECB's Mario Draghi and Jeroen Dijsselbloem, the chairman
of the group of euro zone finance ministers, said neither fiscal
nor monetary policy alone would suffice to revive economic
growth and governments needed to ditch rules that hamper
business and job creation.
"We can provide as much monetary stimulus as we want, as
much availability of credit as we want, but if the person who
plans to use this credit for a new business has to wait eight
months before he or she can open this new business, and then
once she does she has to pay lots of taxes, this person will not
apply for credit," Draghi told a news conference after the ECB's
The ECB has slashed interest rates so low that it now
charges banks to park money with it and is seeking new ways to
pump money into the economy after years when indebted euro zone
countries have raised taxes and cut spending and state jobs.
But Draghi and Dijsselbloem have warned against simply
relaxing government borrowing again to spur growth.
"There is no fiscal or monetary stimulus that will produce
any effect without ambitious and important and strong
structural reforms, so ... the key point is to do structural
reforms," Draghi said.
Dijsselbloem made a similar appeal. Noting that overall euro
zone economic growth stalled unexpectedly in the three months to
June, he told the European Parliament that solid growth in that
period in countries such as Spain, Portugal or Slovakia
reflected reforms already undertaken or being implemented.
"Recent economic data confirm that the recovery in the euro
zone remains very fragile and uneven," Dijsselbloem said.
"Recent developments underscore the need to push forwards
the growth and reform agenda. Fundamental challenges faced by
the euro zone are unchanged," he added, noting the bloc was
facing the threat of a long period of very low inflation.
HARD WORK, NO GRAND BARGAIN
Euro zone finance ministers will meet in Milan on Sept. 12
to continue a debate how to fine-tune existing policies to fix
public finances and support growth at the same time.
Some European leaders, notably in Italy and France, have
been pressing for flexibility in budget-cutting targets in
return for a pledge use the leeway to make painful changes.
But the ECB's Draghi said: "From a confidence-strengthening
viewpoint... it would be much better if we were to have first a
very serious discussion about the structural reforms, and then a
discussion about flexibility."
In addition to using monetary policy, to meet inflation
targets "you need growth, you need to lower unemployment",
Draghi said. "For doing that, you need other things, you need
fiscal policy, you need structural reforms first and foremost.
"So in this sense there isn't any grand bargain here, it's
just that each of us has to do their own jobs."
REFORM, DON'T LOSE TIME TALKING
To stem disinflationary risks and boost credit to the
economy, the ECB cut rates on Thursday to fresh record lows and
launched a new scheme to buy asset backed securities from
But Dijsselbloem warned politicians: "Depending very
strongly on monetary policy has in itself a number of risks,
which may not materialise in the short run, but that you have to
deal with in the longer run."
Europe is debating how to use existing fiscal rules -
written down in the Stability and Growth Pact - and their
flexibility to help the uneven recovery.
Shifting the tax burden from labour to boost domestic demand
would be one of the options, Dijsselbloem suggested, adding
there was space in number of European countries to boost public
Endorsing flexibility within existing rules, he added: "It's
not a free ride."
The debate among finance ministers next week will focus how
to use existing fiscal rules - the Stability and Growth Pact -
to draft the 2015 budgets in a growth-friendly way.
Like Dijsselbloem, Draghi stressed the rules should not be
relaxed and that governments should only use the leeway that was
already written into the laws.
"The existing flexibility within the rules allows the
budgetary costs of major structural reforms to be addressed and
demand to be supported," Draghi said.
(Reporting by Martin Santa; Additional reporting by Catherine
Evans in London; editing by John Stonestreet/Ruth Pitchford)