By Eva Taylor and Paul Carrel
FRANKFURT (Reuters) - The European Central Bank should do "everything it can" to tackle low growth and inflation but euro zone governments must also shape up their economies, a senior International Monetary Fund official said on Monday.
Jose Vinals, director of the IMF's monetary and capital markets department, said a multi-pronged policy approach was needed to buoy the 18-country euro zone.
In addition to the ECB playing a role, he said governments should pursue structural reforms that are "much talked but where there is little action", while remedies to address any capital deficiencies at banks after a sector health check were crucial.
"I think that monetary policy should do everything it can in order to make sure that inflation goes back to fulfil the mandate of the ECB," Vinals told Reuters Insider television.
"But I think that it is very important also to have other policy actions play their part," he added.
Euro zone inflation is running at 0.5 percent - far below the ECB's medium-term target of just below 2 percent. April inflation data are due on Wednesday. A Reuters poll points to a reading of 0.8 percent.
Last week, ECB President Mario Draghi gave his clearest indication yet that the central bank could print money to buy assets if the outlook for inflation deteriorated, and identified a rise in the euro as a potential trigger for action.
The ECB holds its next policy meeting on May 8, in Brussels.
UKRAINE RISK
The 24-member Governing Council will meet against a backdrop of falling excess liquidity - the amount of cash in the system beyond what banks need for their day-to-day operations.
Excess liquidity has dropped below 100 billion euros (82.39 billion pounds), putting upward pressure on short-term money market rates.
However, Vinals was unconcerned by the development, which has taken hold as banks repay early bumper loans they took from the ECB at the height of the euro zone crisis.
"The question is how far it goes," he said of the drop. "Again this is something that will need to be assessed depending on the future evolution, but so far I don't think that this is a tremendous cause for concern. Quite the contrary."
Turning to events in Ukraine, Vinals said that if the crisis there were to escalate, "it would be a significant risk not only for the euro zone, but beyond."
The United States on Monday slapped sanctions on seven Russian government officials and 17 companies linked to Russian President Vladimir Putin in a fresh attempt to force Moscow to back down from its intervention in Ukraine.
The White House said the third round of sanctions in response to the Ukraine crisis was prompted by Moscow's failure to adhere to an April 17 agreement in Geneva.
It was important for the tensions around the Ukraine crisis to "de-escalate rather than escalate", Vinals said.
"I think that this is something which would be very, very important at a time where the world already has many other challenges that it has to face."
(Editing by Andrew Roche)