ECB's Stark: Economic Activity Is Likely To Recover Gradually In The Course Of Next Year

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Eurozone's economic activity is likely to recover gradually in the course of next year, European Central Bank Executive Board member Jürgen Stark said Thursday.

The central banker said uncertainty remains high and incoming data on economic activity are likely to remain volatile.

"Concerns regarding the outlook for a recovery in 2010 mainly relate to renewed increases in international commodity prices, intensification of protectionist pressures and a disorderly correction of global imbalances," Stark said in Frankfurt.

He noted that Eurozone inflation, which is currently in a negative territory, is expected to turn positive again in the remainder of this year and evolve in line with price stability.

"Deflation risk, if there were any, have disappeared," he said.

Further, he said if the gradual improvement in financial conditions since the beginning of the year is due to policy measures by governments and central banks, it would be a "classical case of morale hazard." Stark said these measures cannot be sustained for ever.

He warned that there is risk of a re-emergence of moral hazard once temporary measures by governments and central banks are perceived by financial market participants as permanent.

Eurozone's economic activity is likely to recover gradually in the course of next year, European Central Bank Executive Board member Jürgen Stark said Thursday. (Market News Provided by RTTNews)