ECB's Draghi hints at robust action to help eurozone
Mario Draghi, president of the European Central Bank, has signalled that the ECB is ready to act more aggressively to fight the eurozone debt crisis.
He told the European Parliament that at a summit next week eurozone leaders could restore confidence by agreeing stronger deficit and debt rules.
Such a fiscal union would be "the most important element" in a chain of events, he said. "Sequencing matters."
The ECB is under political pressure to step up its bond-buying programme.
He said: "A new fiscal compact would be the most important signal from euro area governments for embarking on a path of comprehensive deepening of economic integration.
"It would also present a clear trajectory for the future evolution of the euro area, thus framing expectations."
Mr Draghi, in the ECB job for only a month, said a "fundamental restatement" of the region's fiscal rules was essential.
"What I believe our economic and monetary union needs is a new fiscal compact - a fundamental restatement of the fiscal rules together with the mutual fiscal commitments that euro area governments have made."
Access to credit had tightened "seriously" in recent months, and, coupled with weakening economic growth, it "does not bode well", he said.
"The most important thing for the ECB is to repair the credit channel," he said.
He said the ECB was particularly aware of the "continuing difficulties" for banks in raising capital.
Julian Callow, chief European economist at Barclays Capital, said Mr Draghi "appeared implicitly to hold up the offer of a significantly higher pace of debt purchases" and "potentially other measures, provided that euro-area governments were to commit to a new fiscal pact".
The BBC's economics editor, Stephanie Flanders, said: "Will we see the ECB play a bigger role in 'saving' the euro? I think it's inevitable. And I think Mr Draghi is very carefully preparing the way."
Mr Draghi's comments came ahead of a major speech by the French President, Nicolas Sarkozy, who said France and Germany must come together to ensure stability at the heart of Europe.
He said the euro could not continue to exist unless eurozone economies pulled together.
Europe must be "refounded" he said, with France and Germany at its heart to ensure "a zone of stability".
Stricter financial discipline was needed, he added, with more severe sanctions for countries which did not meet their responsibilities.
He and the German Chancellor, Angela Merkel, are due to meet on Monday to propose measures aimed at resolving the eurozone crisis.
On Wednesday, the ECB joined central banks of some of world's biggest economies in a plan to ease tensions within the global financial system by helping commercial banks.
The plan aims to make it easier and cheaper for banks to obtain US dollars. This should, the central banks hope, trickle down and make it easier for businesses and households to get access to finance.
Stock markets saw strong gains on Wednesday as a result of the plan.
This was despite figures showing weak growth in eurozone manufacturing, which fell at its fastest pace for two years in November, according to a closely-watched survey.
Markit's purchasing managers' index (PMI) of activity dropped to 46.4 last month, from 47.1 in October. A reading below 50 indicates contraction.
Also on Thursday, Spain held a bond auction and raised its target of 3.75bn euros ($5.1bn; £3.2bn), but was forced to pay higher interest rates to borrowers than in previous sales.
France held a similar auction but paid lower rates than in its last auction.