–Revised ECB Staff Forecasts Chiefly Result Of Weaker German Outlook

FRANKFURT (MNI) – Recent developments in Italy have renewed market
concerns, European Central Bank Governing Council member Ewald Nowotny
said in an interview with Austrian daily Wiener Zeitung published

Nowotny said Italian Prime Minister Mario Monti had taken “good
steps” to improve the country’s economic outlook, which he argued
remains “better” than in other southern European countries. He noted
Italy has a chance to return to a primary surplus in 2013.

“But there is now once again mistrust in financial markets of
Italy, and the current development has caused significant uncertainty,”
Nowotny observed. Last week former prime minister Silvio Berlusconi said
he would stand for election next year, while Monti over the weekend
announced plans to resign.

“I hope that the new government continues the reform path,” Nowotny

Nowotny, who heads the Austrian National Bank, told the newspaper
that Germany’s worsening outlook had been chiefly responsibly for the
significant downward revision of the ECB’s staff forecasts last week.

“The ECB expects a clear weakening [in 2013], this was recently
made public,” he said. “The problem is above all that Germany will be so
weak in 2013. This will certainly also have consequences for Austria.”

The ECB’s staff GDP projections for next year were revised down
sharply, with a midpoint forecast for a 0.3% contraction, down from 0.5%
growth predicted in June. The Bundesbank also slashed its German growth
outlook for next year to +0.4% from +1.6% forecast in June.

Nowotny also told the paper that the Austrian National Bank’s
“official position” is to maintain current ECB rules that foresee a
voting rotation among Governing Council members once two or more
additional countries join monetary union.

“At the same time I have to say that I cannot imagine an ECB in
which Germany does not have a vote – even if only for a short time,”
Nowotny said after fresh concerns about the rotation were voiced earlier
Tuesday in Germany.

— Frankfurt bureau: +49 69 720 142; email: ccermak@marketnews.com —

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