–Adds Additional Draghi Comments At Bottom

BRUSSELS (MNI) – European leaders must clarify their vision of the
Eurozone’s future in order to lower risk aversion and reduce sovereign
spreads in EMU debt markets, European Central Bank President Mario
Draghi said Thursday.

“The next step is for our leaders to clarify what is the vision of
the future,” Draghi told the Economic and Monetary Affairs Committee of
the European Parliament. “This vision will contribute to lowering of
sovereign spreads and risk aversion in the system.”

Draghi said that to substantiate that vision, leaders should
outline a banking union based on three pillars: a pan-European deposit
guarantee program, a European bank resolution fund and strengthened and
more centralized European bank supervision.

He said having such a union would make it much easier for
authorities to deal with systemically important banks like the troubled
Spanish bank Bankia

Draghi said the ECB had already taken many steps to stimulate the
flow of bank credit but, overall, credit conditions have not generally
improved. “Credit has not started flowing because risk aversion is still
very high and because of the lack of capital,” Draghi said. And those
are two conditions the ECB can’t do much about, he said.

Draghi reiterated that the ECB cannot fill the vacuum left by the
failure of goverments to act on fiscal and structural reforms or by the
current weak state of euro-area governance.

He likened the current state of the Eurozone to a traveler who is
crossing a river with strong currents but who is unable to see the other
side because of fog.

“What we are asking for now is for European leaders to dispel this
fog,” he said.

–Paris newsroom, +33142715540; jduffy@marketnews.com

[TOPICS: M$$CR$,M$X$$$,M$$EC$,MGX$$$,MT$$$$]