The danger of an uneven economic recovery in Europe has fallen despite concerns about the patchy nature of the upturn, European Central Bank Governing Council member Ewald Nowotny said on Monday.
One cannot exclude the possibility of a slowdown in recovery, but I think that the risks of an L-shaped or W-shaped development have clearly decreased, he said told a conference organized by the central bank.
I think we are now clearly on a sustainable path.
Germany and export-dependent smaller euro zone countries are leading the way, while some peripheral countries lag, he said.
Market concerns about the durability of the euro zone's recovery were ratcheted up a notch on Monday after a block of bad news over the weekend.
Following a Fitch Ratings cut of Greek debt by three notches late on Friday, rival Standard & Poor's cut its outlook for Italy to negative from stable on Saturday, while Spain's government was reeling after a stinging defeat in regional elections on Sunday.
Debt markets responded by sending yield spreads on 10-year Spanish and Italian bonds against German Bunds to their widest levels since January, while the euro slid to a two-month low against the dollar and hit a record low against the Swiss franc.
Although this divergence is of course worrisome, we should not immobilize ourselves by focusing on the problematic cases alone, Nowotny said, noting the performance of the EU economy on average was good both during and after the crisis.
He called for strict fiscal discipline, increased emphasis on anticyclical policies during economic upswings, a gradualist approach to institutional reform, and reduced debt levels.
Given the exceptional nature of the current crisis, it is necessary to think carefully about a reasonable and balanced reform package to be able to distribute the costs of the crisis in an equitable and also politically sustainable way.
(Reporting by Sylvia Westall and Michael Shields; Editing by John Stonestreet)