Juncker warns governments against being complacent

European Commission president warns governments against relying too much on loose monetary policy for economic growth

European Commission president Jean-Claude Juncker warned euro-area governments against relying too much on loose monetary policy for economic growth, saying they must quickly strengthen public finances and bolster investment to emerge from the debt crisis.

"Our economic recovery is still fragile," Juncker told the European Parliament on Tuesday in Strasbourg, France. "From my perspective, the crisis is not over and there should be no complacency. Even if we are helped by the action of the European Central Bank, we have only a short window of opportunity to press ahead with our agenda for reforms."

The Brussels-based commission on November 5th cut its forecasts for euro-area growth and inflation next year, citing more challenging global conditions and fading impetus from lower oil prices and a weaker euro. Gross domestic product in the 19- nation currency bloc will expand 1.8 per cent in 2016, down from a previous projection of 1.9 per cent, while inflation will be 1 per cent rather than a previously predicted 1.5 per cent, according to the commission, the European Union’s executive arm.

Earlier this month, ECB President Mario Draghi announced a deposit-rate cut and an extension to quantitative easing after he and colleagues spent weeks signaling mounting concern that inflation expectations were at risk of becoming de-anchored.

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Juncker was joined in Tuesday's EU Parliament debate by Dutch Finance Minister Jeroen Dijsselbloem, who also warned about over-reliance on lax monetary policy. "The gradual economic recovery is ongoing and is relatively broad-based across member states," said Dijsselbloem, who also heads the group of euro-area finance chiefs. "However, since we will not be able to count on several supportive factors such as low oil prices and a very accommodative monetary policy forever, we need to ensure that the recovery becomes self-sustained, in particular given the weaker external environment."

Bloomberg