Governor of Bank of Canada has warned Europe that it faces a “decade of stagnation” if it does not apply sustained and significant reforms to put its fiscal house in order.
Mark Carney issued the warning on Tuesday while making a speech to the Montreal board of trade.
“Europe remains in recession, with economic activity constrained by fiscal austerity, low confidence and tight credit conditions,” said Carney.
He added, “Deep challenges persist in its financial system. Without sustained and significant reforms, a decade of stagnation threatens.”
Carney was vague on details however he pointed out that there are currently few institutional mechanisms within the Economic and Monetary Union (EMI) that could create shocks like the one Spain was hit by when its economy collapsed after the banking system and real estate market crashed.
This was Carney’s final speech as Canada’s central bank governor before taking the role of the head of Bank of England on July 1.
On April 16, the International Monetary Fund (IMF) urged the eurozone to avoid a long stagnation by calling on the European Central Bank to lower its key interest rate and to consider other stimulus measures, adding that efforts to cut budget deficits should be slowed.
Europe plunged into a financial crisis in early 2008. The worsening debt crisis has forced the EU governments to adopt harsh austerity measures and tough economic reforms.
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