FRANKFURT - The rise of populist parties across Europe should act as a wake-up call for governments to finally get their economies in order, a top European Central Bank official said Wednesday.
"The rise of populism should be a wake-up call," the ECB's chief economist Peter Praet told the financial daily Boersen-Zeitung in a wide-ranging interview.
"The governments have to give priority to difficult political decisions and follow through with the much-needed reforms."
Praet's comments came as Greece is preparing for snap elections with a far-left anti-austerity party Syriza leading opinion polls.
Syriza pledges to reverse Athens' reform commitments and even eventually take Greece out of the eurozone.
"Populist parties in some countries promise quick solutions -- but they offer only recipes for disaster," Praet warned.
"Nobody should be under the illusion that you only need to return to the old system and everything will be better," he argued.
Countries had signed up to the single currency because the old system of constant devaluation was not working.
"What is needed now is to make the much needed structural adjustments. A devaluation policy doesn't solve structural problems," Praet said.
There were institutional flaws in Europe which had to be resolved, the economist argued.
"We have a monetary union with a very strong central bank -- but the other institutions have been too weak," he said.
Ready to act
During the long years of crisis, the ECB has been seen as the only European institution capable of action and has repeatedly had to charge to the eurozone's rescue.
"In the past we have had the unfortunate situation in which the ECB was seen as 'the only game in town'. But I think this is changing," Praet said.
"In France, the government for the first time is taking real political risks to improve the labour market. In Italy there is also significant progress at least in policy intentions," he said.
"The authorities have recognised that muddle-through will not make it. But what is important now is implementation. Now is the moment of truth: there is a need for concrete results. Monetary policy alone will not solve our structural problems," Praet insisted.
After a raft of different measures last year to stimulate the eurozone's moribund economy, the ECB is widely expected to take more action again early in 2015, this time in the form of "quantitative easing" or QE -- the large-scale purchase of sovereign bonds.
Praet confirmed that such measures were being considered.
"We have always emphasised that there are two contingencies for further action: first, our measures taken so far have not been enough to have the intended effect... and second, the inflation outlook itself has deteriorated since we decided on the measures we took in the past. Now we have a little bit of both," he said.
There are many critics of QE -- not least the mighty German central bank or Bundesbank -- who see it as a licence to print money to get governments out of debt, which the ECB is strictly forbidden from doing under its statutes.
Nevertheless, most observers believe the question is not "if" but "when" such a programme will be announced, possibly as early as the ECB's first policy meeting of the year on January 22 or the subsequent meeting on March 5.