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European Central Bank President, Mario Draghi

European Central Bank President Mario Draghi called on banks and governments to make the most of a lull in the sovereign debt crisis as he seeks to get the ECB back to its main job of ensuring price stability.

Policy makers “see continued signs of stabilization” in the economy and banks “should use this currently more benign environment to strengthen their resilience further, including by retaining earnings, cutting dividends and bonuses,” Draghi said in a speech in Paris today. “The financial system should serve the economy, not the other way round.”

The ECB has shouldered the main burden of fighting the three-year-old crisis by keeping banks afloat, cutting interest rates to a record low and buying distressed governments’ bonds. The unprecedented measures have swelled its balance sheet to more than 3 trillion euros ($3.9 trillion), prompting Bundesbank President Jens Weidmann to write a letter to Draghi warning that the central bank may be taking on too much risk.

Draghi appealed to the governments, saying that the ECB’s contribution “needs to be complemented by the work of national policy makers” and that “countries should use this phase of financial stabilization to make further progress on their program of economic reform.”

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Gabi Thesing and Mark Deen, Businessweek, March 13, 2012