CAMBRIDGE – Governments are in a key role in solving the sovereign debt crisis, and central banks can buy time, not replace their actions, European Central Bank Executive Board member Benoit Coeure said on Saturday.
The euro zone debt crisis has wreaked havoc in the peripheral countries for three years, and the austerity-weary population is increasingly demanding an end to budget-balancing measures, seen as worsening the crisis.
A huge protest vote by Italians enraged by economic hardship and political corruption this week leaves slim prospects for a durable, reform-minded government in Rome, and election winner Beppe Grillo described Italy as "overwhelmed" by debt.
Coeure said, however, that there is no alternative for governments to reform and restoring sustainable public finances, and added that delaying reforms had costs attached to it.
"A central bank can help to mitigate the impact of the crisis, but the steps it takes cannot be a permanent substitute for resolute action by governments," Coeure said in a speech at Harvard University.
"The central bank can buy time for political bodies to act, but it cannot buy enough time for them not to act."
(Reporting by Scott Malone, writing by Sakari Suoninen; editing by Ron Askew)