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Draghi: 'We Need More, Not Less Europe'

Mario Draghi, President of the European Central Bank
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Mario Draghi, President of the European Central Bank

Mario Draghi, head of the European Central Bank (ECB) insisted that the euro zone was more stable than a year ago but that the region needed more integration - and the U.K should be a part of that.

In his speech at a gala dinner in London's financial center on Thursday, Draghi told the audience that the ECB had prevented market "panic and…financial meltdown."

"We can ... safely say that our Economic and Monetary Union (EMU) is a more stable union today than it was a year ago," he said. "The answer to this crisis has not been less Europe but more Europe. The ECB as an institution at the frontier of European integration has played an active role in addressing the crisis. The credibility of the ECB and it steadfast commitment to its primary objective is unshaken in both the markets and the people of Europe."

(Read More: ECB Rate Cut Could Bring Big 'Disappointment')

Markets were "fully confident that the euro is a strong and stable currency," he told the audience, almost a year since he first told markets that he would do "whatever it takes" to shore up the single currency.

He added, however, that the economic conditions in the region remained challenging and governments must push on with reforms and banking union plans: "The crisis that we are facing today is much more multi-faceted and that means that the policy response must also be much more multi-faceted and must involve a variety of institutions," he said.

UK Must Be More 'European'

As discussions over a potential U.K. referendum on membership of the European Union heat up, Draghi made a rare foray into the debate, saying there was need for mutual cooperation.

"What I can say is that Europe needs a more European U.K. as much as the U.K. needs a more British Europe," Draghi said.

(Read More: How 'Brixit' Could Affect UK Business, Economy)

He said he did not want to address the debate over the political and economic arguments for membership within the European Union but said he wanted to remind people of the "depth of the interconnection" between the U.K. and Europe.

"With such deep interconnections, the U.K. and the euro area share a common interest: the stability in the functioning of our economic system and particularly our financial markets," he said.

Europe Progressing

Holger Schmieding, chief economistat Berenberg Bank, told CNBC that Europe had embraced structural reforms - and the short-term pain that accompanies them - much faster than the U.S.

"The euro zone one way has to be to let deeper crisis happen, to let deeper recession happen but to use that as an opportunity to get structural reform," he said.

"The monetary stance is already pretty aggressive - it's not being fully transmitted to the real economy that's true – but the point which is more crucial point which I think is more important for the future is that European peripheral countries are world leaders in structural reforms and labor market reforms so you do see the basis being laid for a much healthier economy on the European continent."

"Europe has accepted much more readily short-term pain to get over the business of structural reforms whereas elsewhere, the readiness to implement structural reforms just isn't there," he said.

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt

Contact Europe: Economy

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