Like a pious father saying grace before every meal, Mario Draghi, president of the European Central Bank (ECB), once more repeated his standard plea for comprehensive deregulation of euro zone economies at his regular monthly press conference on Thursday. In his opening statement, he prayed for “further measures to enhance labor market flexibility and labor mobility.” Draghi did not, on this occasion, ask for parallel liberalization in product markets — though he did last month and in all probability will next month.

Draghi can be thankful that although the currency union is still far from his happy vision of a highly free-market economy, many member states are at least moving further towards his ideal. Euro zone politicians in the troubled periphery may not be listening to his prayer with reverence — some are unenthusiastic revolutionaries, muttering complaints about the reform agenda under their breath as they ponder how to get their electorates to agree to it. They are, however, listening to him carefully. This is because Draghi holds the purse strings — and the euro zone purse has some very tight strings attached.

Draghi’s home country, Italy, has outlined one of the most ambitious programs of deregulation. This was spurred initially by a letter to the prime minister, Silvio Berlusconi, penned jointly in August 2011 by Draghi and Jean-Claude Trichet on the eve of Trichet’s retirement to make way for Draghi. The missive demanded spending cuts and extensive reforms in return for the emergency buying of Italian government bonds — with strikingly specific suggestions for changes to the labor market, including the liberalization of closed professions and cuts to public-sector wages.

....