"In the eurozone, the sovereign debt crisis in three countries, which together represent six percent of the area's GDP, has the potential to exert significant systemic effects," Draghi said at a central bank conference.
"European economic and monetary union is facing its most difficult test since it was created," added Draghi, referring to Greece, Ireland and Portugal which have agreed bailout packages worth tens of billions of euros (dollars).
"European surveillance over national budget policies, which was weakened in the middle of the last decade on the initiative of the three biggest countries, showed itself wanting just when it was most essential," he said.
Had the European stability pact rules been respected to the letter, the ratio of public debt to gross domestic product on the eve of the crisis would have been 10 percentage points less in the eurozone, he said.
"There are no shortcuts," warned Draghi, calling on governments to rein in public finances.
"Financial support from other governments in the eurozone is needed for countries to proceed with corrections while being sheltered from the volatility on the markets. It is not a fiscal transfer between countries," he said. (read more)