European Central Bank President Mario Draghi, fresh from announcing a new batch of stimulus measures a week ago, urged governments to match the ECB's effort with investment and structural reforms to help the flagging euro zone grow.
A day after incoming European Commission chief Jean-Claude Juncker unveiled his team, Draghi said it may also be useful to have a discussion about the overall fiscal stance of the euro zone with a view to raising public investment where possible.
Draghi stressed that the ECB, which last Thursday cut interest rates to a fresh record low and launched a new scheme to push money into the euro zone economy, could not support the bloc alone.
"My main message today is that only if structural, fiscal and monetary policies go hand in hand will the euro area see investment return," he said in remarks for delivery at the Eurofi Financial Forum in Milan late on Thursday.
Draghi said the ECB's policymaking Governing Council "stands ready to take further action if needed" but he devoted much of his speech to stressing the importance of investment.
Noting that business investment in the euro area has only slightly improved since 2008, while it is above its pre-crisis level in the United States, Draghi added: "We will not see a sustainable recovery unless this changes."
"A decisive rise in investment is essential to bring inflation closer to where we would want to see it, to stimulate the economy, and to bring down unemployment," he said.
To revive business investment, he urged governments to improve the regulatory environment for companies, doing away with red tape that he said can "sap entrepreneurial spirits".
He singled out Spain as a role model for other euro zone countries in this regard, saying it was projected to rebound strongly over the coming two years, aided by business-friendly reforms.
Another way to support investment was to diversify the sources of financing for businesses, extending these beyond the bank-centered model that had been exposed by the financial crisis, Draghi said.
"So we also need to develop reliable sources of non-bank lending, such as equity and bond markets, securitization, lending from insurance companies and asset managers, venture capital and crowdfunding," he said, adding that he supported Juncker's plans to create a capital markets union.
Turning to fiscal policy, Draghi called for a "consistent and credible application ... across time and across countries" of the EU's Stability and Growth Pact, its budget rule book.