The International Monetary Fund on Monday warned that euro-zone officials risk reviving financial and economic stress amid a prolonged recession with a halting response to Europe's crisis.

"The centrifugal forces across the euro area remain serious and are pulling down growth everywhere," the IMF said in its annual economic review of the currency union.

The fund said the European Central Bank should spur demand through additional monetary easing: "Further policy rate cuts, including negative deposit rates, would support demand across the euro area and address deflationary pressures."

Furthermore, Europe's central bank should also use other tools at its disposal, such as new longer-term loans or direct purchase of private assets, to help lower borrowing costs for small- and medium-size businesses in stricken countries such as Spain and Italy, the fund said.

Testifying at the European Parliament in Brussels, ECB President Mario Draghi said the central bank was doing all it could to stimulate lending to the private sector, though it couldn't force commercial banks to lend.