FRANKFURT: The euro zone risks falling into a trap of low growth and low interest rates unless governments stop relying on the European Central Bank to lift the economy and start playing their part, ECB Executive Board member Benoit Coeure said on Monday.
Coeure said the ECB's ultra loose monetary policy was built on the explicit assumption that others would also provide support and their lack of action raises the prospect that interest rates would stay low for even longer.
"If fiscal and economic policies do not in fact play this role, we risk being trapped in a low growth, low interest rate equilibrium," Coeure said in Rome.
"Moving from interest rates being 'low for long' to being 'low forever' would severely limit the room for maneuvre for conventional monetary policy tools, but even more worryingly, it would threaten the contract between generations as well as risk tearing up our social fabric," Coeure said.
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