NEW YORK (TheStreet) -- The European crisis is far from over, with significant structural reform needed to sidestep prolonged deflation and ensure sustainable economic growth.

That's the warning from economists, as expectations rise that the European Central Bank will act to further stimulate growth next month. They hesitate to predict any stimulus or boost to sharemarkets will have a trickle-down wealth effect to the real economy, noting the widening wealth disparity in the United States following the credit crisis.

"European (equities) are undervalued and may have some way to go, but the rally is mature, and growth is still fragile and divergent -- unemployment is high, domestic demand is depressed and credit is dysfunctional," ING chief economist Mark Cliff told the European American Economic Forum at the New York Stock Exchange late on Monday.

Both Cliff and Michala Marcussen, Societe Generale's global head of economics, described the European Banking Union as "timber framed" and said they doubted it would be able to withstand another crisis.

Marcussen said she was concerned about external threats to the recovery, such as Federal Reserve tapering potentially pressuring Europe or a hard landing for China.

She said a raft of structural reform was key to avoiding a situation similar to Japan, which has suffered from decades of deflation. The economist called for more flexible markets in labor, products and services. "If we could do all, that it would add about 20% to GDP over a decade," she said, noting the risk that individual governments may be less motivated to make structural reforms if the ECB tried to shoulder the burden of action.

"In the periphery, Europe is in danger of a deflationary trap," Marcussen added. She said household income growth was the crucial indicator to watch, noting its fall in several European countries was similar to that seen in Japan during the 1990s.

The Japanese stock market has faltered this year, as concerns grow around the failure of structural reform in that economy despite an initial boost from massive monetary and fiscal stimulus since late 2012.

In Europe, Cliffs suggested too much attention was paid to economies such as Portugal and Ireland when Italy and France were more critical to the region. "We still have not seen the big structural reforms come through there yet," he said.

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Others were more optimistic.

KBC Senior Economist for Europe, Siegfried Top, pointed to stabilization in government debt and labor market reforms. "The stress tests should create solid banks that start to lend to the economy and that will be the difference between Europe and Japan," he said. "There will be no further contagion."

Switzerland's second-largest bank, Credit Suisse (CS) - Get Report, agreed to pay a $2.5 billion fine to U.S. authorities for helping Americans evade taxes. The bank said it has seen no material impact on business over the past few weeks, while top management will remain in place and it will not have to hand over client data. The decision is seen as opening the way to investigations cases such as BNP Paribas' transactions with sanctioned countries.

Following the panel, an audience of European executives and investors showed they still rated Europe a "buy" -- though with less conviction than before the discussion. 

-- By Jane Searle in New York

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