ECB chief plays down US recession fears

European Central Bank chief economist Mr Otmar Issing said a double-dip recession in the US is unlikely.

European Central Bank chief economist Mr Otmar Issing said a double-dip recession in the US is unlikely.

He also dismissed as "unfounded" fears of deflation in Europe in the wake of falls on world stock markets.

"I share the opinion of the Fed [US Federal Reserve] that a 'double-dip', while not entirely out of the question, is nevertheless a far more remote possibility than a slow continuation of growth," Mr Issing said in an interview with a German newspaper.

He said the effect of weak stock markets on terms of finance in the Eurozone is "certainly not something that one should neglect".

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But he said, in terms of the overall economy, this influence is of limited significance and plays a far smaller roll in the euro zone than in the US.

There is nothing to indicate that private consumption will collapse as a result of the market losses, Mr Issing said, adding he sees no prospect of deflation in the Eurozone.

"If by deflation you mean a prolonged period of negative price growth rates, then I see not the slightest indication that something like that could be in store for the euro area," he said.

He said a short-term, temporary slip of the inflation rate into negative territory is not what he considers deflation to be.

AFP