Euro structure called ‘unsustainable’

FRANKFURT, Germany – The head of the European Central Bank warned Thursday that the euro currency union is “unsustainable” without stronger political and financial ties, and called for a new course to save it from a crippling debt crisis.

Mario Draghi heaped criticism on European political leaders for being slow to respond to the 2  1/2-year crisis, saying delays and half-measures had only made the situation worse.

Speaking to the European Parliament in Brussels, Draghi said the central bank has done what it could to fight the problems by reducing interest rates and giving $1.2 trillion in emergency loans to banks. Now, he said, it is up to the 17 member countries to devise a broad vision for the future.

The ECB cannot “fill the vacuum of the lack of action by national governments,” he said, urging sweeping reforms to spur growth, reduce deficits and create a Europe-wide banking regulator.

Beyond that, the euro needs a fundamental reworking of its rules and management, he said, calling the current structure “unsustainable unless further steps are taken.”

Europe’s leaders need to “clarify what is the vision … what is the euro going to look like a certain number of years from now? The sooner this has been specified, the better,” said Draghi, an MIT-trained economist.

The blunt diagnosis from the ECB chief came as the eurozone enters another tumultuous period of financial and political instability. Investors are worried that recession-hit Spain will be unable to prop up its banks burdened by toxic bad loans – and that it will follow Greece, Portugal and Ireland in asking for an international bailout the eurozone can ill afford. These jitters have sent Spain’s borrowing costs soaring and stock markets plummeting.

And in just over two weeks Greece returns to the polls with the real possibility that it might elect a government that rejects the terms of its multibillion-dollar bailout. This could force the country out of the euro, irreparably fracturing the eurozone and further roiling markets.

Olli Rehn, the European Commission’s top financial and monetary affairs officer, echoed Draghi by calling for a “long-term road map.” He said there was “no easy fix” if EU leaders “want to avoid the disintegration of the eurozone and instead make the euro survive and succeed for its member countries, and especially its citizens.”