The global economy continues to recover from the worst recession in 70 years with "dynamic" emerging markets leading the way, top policymakers said on Monday.
European Central Bank President Jean-Claude Trichet, who chaired talks on the global economy at a Bank for International Settlements meeting, said fiscal consolidation was essential for a sustainable recovery and for economic confidence.
"There is a confirmation of the progressive normalization of the economy and of the fact that at a global level we are on a recovery mode," Trichet told a news conference.
The world's biggest economies — the European Union, the United States and Japan — emerged from recession in the third quarter of last year.
But many central bankers and analysts have expressed doubts about the sustainability of the recovery and have warned of a rocky road ahead.
Ewald Nowotny, who heads Austria's central bank, said growth was expected to be slow this year and that the ECB's December forecasts were still valid.
"It will be positive growth in 2010 but it will be still a rather sluggish recovery. So it means that one has to be still rather cautious with regards to the economic development," he told reporters on the sidelines of the meeting.
The head of the Financial Stability Board (FSB) warned on Saturday bankers should be aware of the fragility of the economic recovery when taking on new risks.
Mario Draghi, who also heads the Italian central bank, said financial markets were in much better shape than could have been expected a year ago, but much of the improvement was due to extraordinary monetary and fiscal measures.
Trichet said at the meeting, attended by representatives from the U.S. Federal Reserve, the Bank of Japan and the Bank of England as well as emerging economies, that governments had to be fiscally responsible.
"We had a lot of time devoted to the issue of fiscal imbalances, the necessity to be credible in going back to normal and sustainable handling in the mid-term of the fiscal position," he said.
This was important for confidence on the economy, he said.
Many commercial bankers also attended the meeting — they are usually invited to the January meeting. Trichet said central banks look carefully at credit dynamics and reminded banks to improve their risk management.
"That is of the essence," Trichet said.
But Trichet declined to comment on what was discussed with commercial bankers.
Policymakers around the world, from U.S. President Barack Obama to Trichet, have urged banks to keep lending to the private sector, but have also warned them against taking excessive risks.
When Nowotny was asked about worries of bank risk-taking, he pointed at banks in the United States.
"I don't think this is a major problem in the euro area but we do see signs worldwide," he said.
"I understand that this is of some concern, especially to the American authorities."
Top central bankers also increased pressure for speedy reform of an accounting rule blamed for amplifying the credit crunch and warned it must not widen the scope of a much criticised asset valuation method.
Trichet also said current account imbalances had been reduced during the crisis and that central bankers work on continuing this development.
Some central banks — such as Norway and Australia — have already raised interest rates, while the ECB has said it will start rolling back some of its extra liquidity supplies.
Trichet said his comments were on a global level and gave no indication of the European Central Bank policy decisions on Thursday.
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