Fed's Yellen says austerity policies may be counterproductive

Austerity policies in the United States and Europe that sharply cut spending to reduce budget deficits could be self-defeating if they derail economic growth, Federal Reserve Vice Chair Janet Yellen said on Monday.

"Both for the United States and for Europe ... fiscal austerity does raise unemployment, weaken the economy and ... in addition undermines the goals for which it is designed to achieve," Yellen said.

(Reporting by Pedro da Costa and Jason Lange; Editing by James Dalgleish)