‘Debt-fuelled growth substitute for reforms’, says bank

Greece is on the front-line of current financial problems AP

A long phase of extremely low interest rates on a global scale is a dangerous situation, and a sign of malaise in the world economy, according to the Basel-based, Bank for International Settlements (BIS).

The umbrella organisation for central banks made the warning comments in its 85^th annual report, released on Sunday.

BIS stressed that “the fall of sovereign bond yields into negative territory” was not only “unprecedented”, but had gone beyond what was previously deemed possible.

According to the bank, expansion on a global scale has been unequal, with productivity at a lower level than is needed for such an environment with high debt levels and financial risk.

Many national economies are finding it difficult to get back to a healthy level of growth, and financial policy is heavily burdened.

In the eurozone the key interest rate has been kept at the low level 0.05% since September 2014, with no end to the low-interest period in sight. 

Underscoring an attack on low productivity as one of the key issues, BIS said the “debt-fuelled growth model” had acted as a political and social crutch in recent times, and had to be replaced by reforms that pushed for increased productivity, instead of acting as a poor substitute.