* Bank of Canada chief says Europe should learn from Japan
* Final speech before Carney leaves for Bank of England
* Says tightening bias aimed in part at household debt
* Says the considerable stimulus now in place is appropriate
By Leila Lemghalef
MONTREAL, May 21 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
Carney is also the chairman of the Financial Stability
Board, the Group of 20 leading economies' task force on
A euro zone banking union is one of the major reforms Carney
mentioned as a necessary step towards economic health in the
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
Markets are keen to know whether Poloz will maintain the
rate-hike bias the central bank has had for the past year even
though growth has disappointed and there are signs excessive
borrowing by Canadians is becoming less of a concern.
Carney made it clear there was no rush to raise rates from
the current 1 percent.
"There is considerable monetary policy stimulus that's being
provided every day to this economy, and it is appropriate and
necessary," Carney told reporters.
The central bank is well aware that the economy faces "major
headwinds" from abroad, poor export performance and a strong
Canadian dollar, he said, and is calibrating policy accordingly.
Analysts surveyed by Reuters in early April expected a rate
hike in the third quarter of 2014.
Carney said the central bank's rate-hike bias was, in part,
to complement the efforts of the government and the bank
regulator to curb record-high household debt, which he said had
been moving in the right direction.
"It's an evolution. It's not finished," he said.
While much of Carney's speech focused on the Canadian
economy's relatively successful performance in the financial
crisis and its aftermath, he warned that the country can no
longer rely on consumer borrowing to fuel growth.
Instead, it should turn to business investment and exports,
though these are expected to remain relatively weak in the short