Central Banks

Sunday, December 11, 2011 - 18:18

ECB Nowotny: Euro Will Endure, But May Have Recession: Paper

FRANKFURT (MNI) - The Eurozone will not fall apart, but a recession cannot be excluded, European Central Bank Governing Council member Ewald Nowotny said in an interview published over the weekend.

Nowotny, who heads the Austrian National Bank, told Austrian daily Kronen Zeitung on Friday that "we can overcome this crisis, because a change in thinking has taken place. We now know that indebtedness has limits. Hopefully, confidence in the financial sector can emerge again on this basis."

As for the single currency, Nowotny said he was "convinced that it will not fall apart, because it is in the interest of the rich AND the poor countries. I just hope it won't come to irrational developments."

Pressed on whether he really believed the euro would endure, he said: "That is my absolutely honest personal opinion."

There will "in any case" be a "massive growth slowdown," Nowotny cautioned. No one can say at the moment whether a contraction will occur, "but a recession...can no longer be entirely excluded."

Nowotny played down the split at the EU summit Thursday night between the UK and its European partners, arguing that it was "better to achieve concrete progress, even if not all 27 [EU] states join in, than to unite around the smallest common denominator."

-- Frankfurt bureau tel.: +49-69-720142. Email: dbarwick@marketnews.com

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