FRANKFURT, March 17 The Bank for International
Settlements raised concern that buoyant financial markets are
getting too dependent on monetary and fiscal stimulus,
discouraging governments from pushing through reforms.
Central banks in the United States, Europe and Japan have
calmed financial markets with lower interest rates and asset
purchase programmes, buying governments time to implement
reforms that make their economies more competitive.
And while stock markets rallied, volatility diminished and
corporate bond spreads tightened over the past six months, the
outlook of the real economy had not improved, mainly because of
monetary and fiscal accommodative policies, the BIS said.
"The fact that market dynamics have become ever more
dependent on central bank and government stimulus is a cause for
concern," Stephen Cecchetti, BIS economic adviser and head of
the monetary and economic department, said in a conference call,
presenting the BIS quarterly report on Sunday.
There were clear limits to what policy could achieve,
Cecchetti said, "importantly, expansionary policy, especially
central bank accommodation, cannot solve structural problems".
Global debt - held by households, non-financial enterprises
and governments combined - had risen by 30 trillion dollars or
40 percent of the global gross domestic product (GDP) since
2007, and further borrowing would not be the answer to the
current problems, Cecchetti said.
"With monetary and fiscal policies reaching their own
limits, it is important to lay the foundation for strong
sustainable growth," he said, referring to reducing the barriers
to reallocating capital and to the movement of workers across
sectors, as well as addressing the problems in pension,
healthcare and education systems.
"The payoffs of these structural reforms will only accrue
over time. So we have to get started as soon as possible,"
"Increasing public and private debt ever further until we
are not able to fund it is not a substitute for these reforms."