“We do not let inflation undershoot our objective for longer than is avoidable given the nature of the shocks we face” Mario Draghi told the Brussels Economic Forum. “For others, it means devoting every effort to ensuring that output is returned to potential before subpar growth causes lasting damage”.
 
The ECB has been easing policy aggressively to boost growth and inflation in recent years with little to show for its efforts, fuelling arguments that monetary policy was at its limits and governments need to step up.
 
“There are many understandable political reasons to delay structural reform, but there are few good economic ones. The cost of delay is simply too high” Mr. Draghi said.
 
Mr. Draghi pointed towards labor market and activation policies, singling out areas of improvement, also suggesting Europe lags behind in innovative capacity.
 
“Given the harm that has already occurred to potential growth during the crisis, it also means (a need for) acting decisively to raise potential” Mr. Draghi said.
 
ECB President said growing below potential for too long actually reduced the economy's potency because instead of output rising toward capacity, potential would fall toward the actual output, permanently embedding low growth.
 
The euro zone grew by just 1.6% last year with much of the expansion coming from the ECB's stimulus and growth is expected to flat line over the next years with inflation also holding below the ECB's target of close to 2%.