International Monetary Fund Managing Director Christine Lagarde on Monday warned that the risk of prolonged low inflation is looming in the euro area and it could derail the recovery. High debt levels continue to hold momentum back, and financial fragmentation persists, she said in Spain. The lender forecast the euro area to grow 1 percent in 2014 and 1.4 percent next year. Lagarde urged the currency bloc to complete the banking union and to repair bank balance sheets. Further, she called upon more accommodative policies and targeted measures to address low inflation. Eurozone should continue advancing product and labor reforms, which can make a significant contribution in unleashing productivity and restoring competitiveness, she observed. Creating jobs must be the overriding focus for Spain, Lagarde said. Labor market reforms should be deepened, she added. Spain's viable firms should restructure their debt so they can stay in business and the government should reduce the fiscal deficit in a gradual, growth-friendly way, she said. In addition, Spanish business environment needs to be strengthened so as to make it easier for businesses to start up and grow, Lagarde noted.