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TheStreet Open House

Draghi: Reforms Must Continue Despite Social Cost

By DAVID McHUGH

FRANKFURT, Germany (AP) â¿¿ European Central Bank President Mario Draghi has acknowledged that austerity measures and economic reforms can have heavy social costs â¿¿ but argues they are the way to a fairer society because they can reduce injustices such as widespread youth unemployment.

Draghi's remarks Wednesday come two days after an election in his native Italy, in which a majority of voters supported parties campaigning against austerity. The spending cuts and tax increases were carried out by Prime Minister Mario Monti over the past 15 months to lower the government's massive debt burden and restore confidence in the 17-country euro, but they are blamed for worsening the recession and unemployment.

Draghi did not mention Italy in the text of his speech at the Catholic Academy in Munich, where he focused on ethical issues connected with economics. He paid tribute to efforts by the city's former archbishop, Pope Benedict XVI, to emphasize social justice in the global economy, and mentioned his own education at a Jesuit-run Catholic school.

But he addressed indirectly Europeans' growing indignation over austerity measures.

"The benefits of the painful actions undertaken so far have not yet materialized," he said. "And this means that economic adjustment is coming at a heavy social cost... We are fully aware of the human dimension that lies behind it."

Calling unemployment "a tragedy," he urged governments to press ahead with fixing structural problems in their economies so that they can grow more strongly. He singled out the high rate of youth unemployment, which is over 50 percent in Greece and Spain. "Is that fair, that as a result, this generation has to bear the bulk of the burden in the downturn?" he asked.

"That's why I say that reforms that make economies work better also make them fairer."

Monti reduced the deficit but saw some key reforms to increase growth and reduce unemployment blunted by political opposition. Unions fought his efforts to lessen job protections for older workers that help keep younger people from breaking into the job market.

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