FRANKFURT--The eurozone economy is getting back on the growth track, as the European Central Bank's monetary policies begin to take hold, the central bank's chief economist said in remarks prepared for delivery Thursday.
Peter Praet said, however, the currency bloc can't run on all cylinders without moves from other actors, such as governments and firms, to set the stage for the eurozone to perform better economically over the long term.
"The euro area needs a combination of policies for the cyclical recovery we are seeing to become a lasting one," he said. "Accommodative monetary policy and determined structural reforms need to go hand-in-hand."
"The euro area economy seems now to be turning the corner. Both the hard and soft data suggest that the activity is gathering momentum and looks set to strengthen over the course of this year," said Mr. Praet according to a text to be delivered in Berlin. He said that forecasters have upped their forecasts for economic output for this year and future years. "We are therefore seeing the beginnings of a cyclical recovery. But it is not yet a structural one."
Mr. Praet explained that this meant the decline in the eurozone's potential growth rate, or what he likened to the economy's "speed limit," hadn't yet been dealt with.
He said that while over the short-term monetary policy can help spur economic growth, it can't do the same over the long term. The economy's growth pace ultimately comes down to investment incentives, how easily firms can do business and public institutions. "And making improvements in all of these areas comes down chiefly to structural policies," he said.
"Importantly, our monetary policy is creating a unique window of opportunity to enact such reforms," he said. Accommodative policy supports firming demand and improved access to credit, which can cushion the downside risks of reforms in the short term, he said. "For this reason, there is every reason for national authorities to push ahead with structural reforms today."