Mario Draghi, the European Central Bank president, remains a key player in efforts to save the Eurozone.

Two years ago, he halted a Eurozone crisis by loosening the interest-rate logjam that threatened beleaguered countries such as Portugal, Ireland, Italy, Greece and Spain, whose borrowing costs were oppressive.

On Sept. 4, Draghi took action to prevent Europe from relapsing into a recession. Unemployment remains at about 11 percent in the Eurozone; the region’s real gross domestic product is stalled near zero; and inflation slowed in August to 0.3 percent.

“Most of the data, we got in August on GDP and inflation showed that the recovery was losing momentum,” Draghi said.

Draghi cut interest rates to .05 percent. He forced Europe’s banks to pay 0.2 percent to park their money. This so-called “negative” deposit rate, instituted in June, has pushed some market interest rates below zero. And Draghi plans to begin U.S. Federal Reserve-style quantitative easing. Starting next month, the ECB will begin buying about $900 billion of asset-backed securities — packages of home loans, business loans or even credit card debt.

Draghi’s move improved Europe’s competitiveness — the Euro fell to a 14-month low of $1.29 to the dollar. The stock markets of Europe and the U.K. jumped on the news.

Draghi took these steps despite strong opposition from Europe’s wealthier countries, specifically Germany. The ECB suffers from conflicts between its creditor and debtor nations. In opposition to Draghi, the Germans preach austerity — a strict adherence to balanced budgets. Germany’s critics, particularly in Southern Europe, bemoan their intertwined problems — low inflation and stagnant growth. A balanced budget would make the debt burdens of Portugal, Ireland, Italy, Greece and Spain more onerous.

Draghi is pushing Europe’s banks to lend more, believing it to be more productive than letting the banks earn money from asset purchases.

Economists doubt Draghi has much left in his tool box with which to enliven Europe’s economy. Carl Weinberg, chief economist of High Frequency Economics, said, “it is a positive step by the ECB” but he added “no matter how you look at it, monetary policy has done all it can.”

Draghi concedes that his monetary steps cannot work in a vacuum. At a Federal Reserve conference in Jackson Hole, Wyoming, last month, Draghi complained about the impediments to entrepreneurship that still plague many Eurozone countries.

“We can provide as much credit as we want,” he said. “But if the person who plans to use this credit for a new business has to wait eight months before he or she can open this new business, and then she has to pay lots of taxes, this person will not apply for credit.”

The overcapacity problem

Meanwhile, politicians and unions oppose efforts to curtail European companies’ overcapacity. ENI, an energy giant 30 percent owned by the Italian government, has racked up $1.3 billion in operating losses in the past five years because of a 30 percent drop in demand. Despite this, these critics prevented it from closing a huge refinery this year.

European car makers also confront outsized surpluses. Fiat chief executive Sergio Marchionne recommended widespread factory closings in Europe. Union and political opponents let him shut just one Italian factory in 10 years. Italian car sales have plummeted 50 percent since 2007.

I fear Draghi is trying to push the proverbial string. His bold monetary actions will not lead to meaningful long-term economic growth because they have not been accompanied by fiscal and political reforms.

A review of 67 International Monetary Fund reports on the 27 European Union countries from 2008 through 2011 show they are remarkably consistent. IMF’s recommendations for Europe to be competitive?

Reduce the size of government, reduce the bargaining power of labor, cut spending on pensions and health care and increase the labor supply.

Originally published in the Sarasota Herald-Tribune