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IMF chief Christine Lagarde urged the European
Central Bank to keep an accommodative monetary policy until
private demand had fully recovered and called on EU countries to
tackle structural road blocks that hurt job creation and
productivity.
Just days after the IMF warned in a regular report on the euro
zone that any new shocks could halt the bloc's economic
recovery, Lagarde hammered the message home at a conference in
Paris, saying: "The good news is that the European economy is
recovering from the crisis. Confidence is improving and
financial markets are upbeat. Perhaps too upbeat."
The IMF has urged the euro zone to support economic demand,
complete a reform of the banking sector known as banking union
and advance structural reforms.
"There is the danger of a vicious cycle: persistently high
unemployment and high debt-to-GDP ratios jeopardize investment
and lower future growth," Lagarde said on Friday, according to
the prepared text of her speech.
In its latest annual report, the Bank for International
Settlements warned at the end of June that ultra-low interest
rates had lulled governments and financial markets into a false
sense of security.
But world markets have since come under pressure as the
suspected downing of a Malaysian airlines jet at the
Ukraine-Russia border, new sanctions on Moscow and unrest in
Gaza have sent investors scurrying into defensive assets.
(Reporting by Leigh Thomas; Writing by Ingrid Melander; Editing
by Brian Love and Susan Fenton)
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