By Judith Ugwumadu | 3 March 2014

The eurozone must push on with austerity measures, bringing in targeted fiscal reforms to tackle low inflation and boost the job market, the head of the International Monetary Fund said today.

Speaking at an economic forum in the Spanish city of Bilbao, Christine Lagarde said radical solutions and ambitious reforms were needed.

‘Thanks to the formidable actions over the past five years, Europe – and Spain – are now turning the corner. Yet the task is far from finished. Growth remains low and unemployment too high for us to declare victory on the crisis.’

She said high debt levels continued to hold back momentum and financial fragmentation were still an issue.

Inflation in the eurozone was holding on at 0.8%, substantially below the European Central Bank’s target of 2%, adding pressure to the recovery. ‘The risk of prolonged low inflation is also looming and could derail the recovery,’ Lagarde said.

‘In terms of the fiscal stance planned for the euro area for 2014, we believe it is broadly appropriate – but it must be complemented at the national level with credible medium-term frameworks, and appropriately paced consolidation.’

The IMF chief also called on European leaders to strengthen the architecture of monetary union and improve productivity.

Lagarde said job creation must be the overriding focus for Spain where unemployment remains high. Although, the region was out of recession it was not out of the crisis and she emphasised that ‘there can be no let-up in the reform momentum’.

She continued: ‘The strong reform momentum must be maintained. And we can see three key areas where further progress will be crucial.’

‘There is no doubt that that the reforms that I outlined for Europe and for Spain will take several years of determined efforts by both government and society,’ said Lagarde.