Euro zone inflation risks remain on the upside in the short term but slower economic growth should reduce price pressures over time, European Central Bank (ECB) Governing Council Member Guy Quaden was quoted as saying.

 

 

Economic growth in the 15 countries that use the euro single currency could slow to less than 1.5 per cent next year, the European edition of the Wall Street Journal newspaper on Thursday quoted Quaden as saying.

 

"In the short term, the risks for inflation are still on the upside," Quaden said, echoing remarks made by ECB President Jean-Claude Trichet on Wednesday.

 

"Normally, in a market economy, with time, a slowing down of economic activity should alleviate inflation pressures and, in particular, moderate oil and other commodity prices," he said.

 

Referring to the ECB's latest staff projection of euro zone economic growth of between 1.3 per cent and 2.1 per cent in 2009, Quaden said: "If financial turbulences persist, commodity prices continue to increase and the volatility of the currency market remains high, growth will be in the lower part of the range."

 

"The excessive volatility of the foreign exchange market is clearly a negative risk," he added.

 

Quaden also said it did not appear, for the time being, as if any big pan-European bank would be close to collapse.

 

"There is already a good level of cooperation and information exchange between the various supervisory authorities. But it seems to me, now is a good opportunity to reinforce the cooperation and simplify the architecture of the controls," he said. (Reuters)