Bank of Canada's Carney says Europe needs big reforms

Tue May 21, 2013 8:53pm EDT
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By Leila Lemghalef

MONTREAL (Reuters) - Europe could face a decade of stagnation unless it makes big reforms and it should heed the lessons of Japan, Bank of Canada Governor Mark Carney said on Tuesday as he highlighted Japan's bold moves to bolster growth.

In his final speech as Canadian central bank chief before he takes over as governor of the Bank of England on July 1, Carney said Europe's recessionary economy is being held back by fiscal austerity, low confidence and tight credit conditions.

"Deep challenges persist in its financial system. Without sustained and significant reforms, a decade of stagnation threatens," Carney said in the speech, given in Montreal.

"Europe can draw lessons from Japan on the dangers of half measures," he said, adding that the success or failure Japan's massive monetary stimulus - which he termed a "bold policy experiment" - will affect the outlook for the world economy in coming years.

Carney is also the chairman of the Financial Stability Board, the Group of 20 leading economies' task force on financial regulation.

A euro zone banking union is one of the major reforms Carney mentioned as a necessary step towards economic health in the region.

He made no specific reference to the British economy or the Bank of England. But in a news conference following his speech, he downplayed the influence he will have as an individual on policy decisions in his new job.

On Canadian monetary policy, he said little as he prepares to hand over the reins to his successor at the Bank of Canada, Stephen Poloz, currently the head of Canada's export credit agency.   Continued...

Bank of Canada Governor Mark Carney arrives at the G7 Finance Ministers meeting in Aylesbury, southern England May 10, 2013. REUTERS/Alastair Grant/Pool