The heavily expansionary nature of global monetary and fiscal policy is becoming increasingly evident, European Central Bank Executive Board member Juergen Stark said on Wednesday.
Speaking at an event organised by the German Christian Democrats, Stark, who oversees the ECB's economics division, said global imbalances remained a persistent problem and critcised lacklustre progress in bringing them under control.
"The foreign exchange regimes of key emerging economies continue to build huge excess currency reserves. At the same time very expansionary monetary and fiscal policy is increasingly noticeable," Stark said in a speech text provided by the ECB.
"We are still a long way away from a sustainable and balanced growth in large emerging and industrialised economies."
In April, the ECB became the first major Western central bank to hike interest rates since the onset of the financial crisis. It is expected to repeat the move in July to take rates to 1.5% from their current level of 1.25%.
Speaking earlier in the same event, ECB Governing Council member Mario Draghi said overheating was "a clear and present danger" and that inflation could undermine the solidity of global growth.
Draghi also said heavy debt loads presented downside risks to global growth.
In his actual speech, Stark also warned that Greek banks would face heavy losses of deposits if the country were to restructure its public debt.
He said Greece must reach a primary surplus -- where tax and other revenues outsize outgoings, excluding interest payments -- and that cutting debt by restructuring would not solve the underlying problems.
"That (restructuring) would not be cheap. We should think a step ahead," Stark said.
He also said that while the financial crisis was not so evident in Germany anymore, it remained too early to call it over.
Currency dumpingStark took particular aim at emerging market economies for building reserves or pegging their currencies to the dollar to create a competitive advantage in export markets, urging them to move towards free-floating currency systems.
He vowed the ECB would not participate in "currency dumping" as he called it, and underscored the fact the bank had already phased out some of its crisis support measures.
The biggest challenge for major industrialised economies, meanwhile, were high debt levels, Stark said. He called for under pressure nations to "pursue consolidation of public finances in a determined fashion and at the same time reduce monetary stimulus."
Turning to operations to provide commercial banks with funds, Stark said central banks should never pre-commit to providing banks with ubiquitous liquidity during times of trouble.
