Aug 25 (Reuters) - Open trade and global cooperation is vital to lift growth, European Central Bank President Mario Draghi said on Friday, warning against the threat of protectionism to the world economy.
Globalization has left pockets of people behind, fostering distrust and ultimately threatening the sustainability of openness, a vital component of growth, Draghi said at the U.S. Federal Reserve's annual policy conference in Jackson Hole, Wyoming.
"A turn towards protectionism would pose a serious risk for continued productivity growth and potential growth in the global economy," Draghi said in a speech that did not touch on current monetary policy. "To foster a dynamic global economy we need to resist protectionist urges."
Although the Euro zone economy is having its best run in a decade, with 17 straight quarters of growth, big gaps have opened between the bloc's core and peripheral members, and between the top and bottom tiers of society, fueling social tension and discontent with the European project.
Indeed, while German's unemployment rate is now under 4 percent, the jobless rate in Spain is still over 17 percent, more than twice the level before the 2007-2009 global financial crisis. Youth unemployment is even more alarming: 45 percent of young Greeks and 38 percent of Spanish youth are out of work.
And in Italy, where anti-euro, populist parties are making headway ahead of an election next year, economic output is still well below its pre-crisis peak, fueling arguments that the constraints of the euro keep the country in a vicious austerity spiral with little hope of a sustained rebound.
"Without stronger potential growth, the cyclical recovery we are now seeing globally will ultimately converge downwards to those slower growth rates," Draghi said.
Much like Fed Chair Janet Yellen earlier on Friday, Draghi defended global financial regulation, which was bolstered after the crisis.
"Given the large collective costs that we have observed, there is never a good time for lax regulation," Draghi said. "But there are times when it is especially inopportune."
"Specifically, when monetary policy is accommodative, lax regulation runs the risk of stoking financial imbalances," he added. (Reporting by Balazs Koranyi and Howard Schneider; Editing by Chizu Nomiyama and Paul Simao)