Mark Carney, making his last speech as Bank of Canada governor before he takes up his post at the BoE in July, said European growth is being held back by fiscal austerity.
The central banker said austerity will ultimately lead to a decade-long period of stagnation for the continent, and he urged policymakers to change course.
“Europe remains in recession, with economic activity constrained by fiscal austerity, low confidence and tight credit conditions. Deep challenges persist in its financial system,” he said.
“Without sustained and significant reforms, a decade of stagnation threatens.”
Carney (pictured) said he welcomed moves by the Bank of Japan last month to almost double its government bond buying programme over the next two years from ¥4trn to ¥7trn (£46bn) in a bid to stave off deflation and kick-start the stagnant economy.
Carney suggested Europe should follow suit, in order to stimulate growth and get the continent out of recession.
“Europe can draw lessons from Japan on the dangers of half measures,” he said.
“It is now more than two decades since the Japanese financial crisis erupted. To end its debilitating legacy, Japan has just embarked on a bold policy experiment. Its success or failure will have a major impact on the outlook over the coming years.”
