By Yali N’Diaye

WASHINGTON (MNI) – Although European growth is likely to fade and
become “moderate” going forward, there is “not much concern” it could
experience a double-dip recession, European Central Bank Governing
Council member Axel Weber said Friday.

In an interview with CNBC, he also repeated the need to make fiscal
consolidation a top political priority, opposing additional spending
programs.

Weber, who has been often cited by ECB watchers as a potential
successor to Jean-Claude Trichet to head the central bank, said any
discussion related to that issue will have to be when his term as
Bundesbank president ends in one and a half years.

Until then, he remains focused on his current job as the Bundesbank
president.

“I’ve got a good job, and that is president of the Bundesbank,” he
said when asked if he would like to head the ECB when Trichet’s term
ends.

Since Weber’s term does not end for another year and a half at the
Bundesbank, “everything else will have to be discussed after that period
of time,” he said.

Weber otherwise declined to comment on the ECB monetary policy —
or on the Federal Reserve’s for that matter.

On the economy, he said Europe is “bordering on a self-sustaining
recovery,” adding, “there is not much concern for a recession, a renewed
recession.”

That is not to say the economy won’t weaken going forward. But
even as the recovery loses momentum in the coming quarters, “growth will
remain on track,” he said.

In Germany, the economic cycle is somewhat lagging the U.S., he
said, highlighting a “stellar performance” of the German GDP in the
second quarter.

Importantly, exports were not the sole driver behind the 2.2%
quarterly growth, as domestic consumption contribution was even
stronger.

Turning to the labor market, he said that while Germany used to
have a high structural unemployment rate, it is no longer true as the
country has implemented reforms to increase flexibility.

“Let me remind you that Germany saw no major rise in the
unemployment rate, even during the crisis,” he said, “and it’s falling
again already.”

In fact, the German labor market has been “totally out of synch”
with markets across the world.

And going forward, Weber expects the German unemployment rate to
fall to 7% and even lower.

Against the backdrop of rising growth, even at a moderate pace,
additional fiscal spending is not justified, he said.

“This is no point to embark on additional spending.” For economies
already on an “expansionary path, additional expansionary measures may
not be as productive.”

To the contrary, fiscal consolidation should be the priority.

He said the economic impact of fiscal consolidation can be either
positive or negative, but short-term benefits should always be
considered in light of the long-term drawbacks.

In the case of Germany, fiscal consolidation has helped boost
confidence in the economy, he noted. This illustrates that “fiscal
consolidation can be confidence inspiring.”

So it’s important to put in place incentives for fiscal
consolidation. But that must be done in all countries.

“Relying on each other as a crisis measure can be detrimental to
long-term sustainability of the fiscal position,” Weber warned.

And while immediate market tensions may be behind us, there is a
“continuing challenge” regarding the European debt and fiscal situation.

Fiscal consolidation, he said, “is a long-term project and it will
be with us for a long time.”

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$$EC$]