Draghi Says EU Helps Protect Sovereignty in Globalized World

(Bloomberg) -- European Central Bank President Mario Draghi launched into a defense of the European Union project as a way for countries to protect their sovereignty in an increasingly uncertain global environment.

Speaking at a time when the EU is grappling with Brexit and rising populism, Draghi said the trading bloc’s institutional framework has allowed its members to be free in many areas.

“In today’s world, technological, financial and commercial interlinkages are so powerful that only the very largest countries are able to be independent and sovereign at the same time, and even they cannot do so entirely,” ECB president said in a speech in Bologna. “For most other nation states, including the European countries, these two characteristics do not coincide.”

Hinting at Britain’s decision to leave the EU and anti-euro sentiment in Italy, Draghi said being outside the bloc “might lead to more policy independence, but not necessarily to greater sovereignty. The same is true of the single currency.”

The U.K. is set to depart on March 29, but London and Brussels are at loggerheads over the terms of the divorce deal. French central bank Governor Francois Villeroy de Galhau said earlier on Friday the prospect of a hard Brexit looks “less and less implausible.”

Draghi called on EU leaders to adjust existing institution to change in order for European “values to remain essential, fundamental.”

“This process of adjustment has so far encountered resistance because the inevitable national political difficulties always seemed to be above such need,” he said. “There should be no doubt: this adjustment will have to be as deep as the phenomena that revealed the fragility of the existing order, and as vast as the dimensions of a geopolitical order that is changing in a way that is not favorable for Europe.”

Draghi didn’t refer to monetary policy in his speech. The ECB is less then two weeks away from a policy meeting on March 7, when officials will debate whether they should respond to the slowdown in the euro area and which tools should be deployed if the downturn deepens.

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