ECB's Nowotny: euro zone north-south split to grow

The gap between northern and southern euro zone economies will continue to widen for another three years, European Central Bank policymaker Ewald Nowotny said on Tuesday, adding that rising oil prices were now the bloc's main inflationary threat.

In a chatroom discussion on Austrian newspaper Der Standard's website, Nowotny said the euro zone's sovereign debt crisis has exposed how uncompetitive southern economies such as Greece, Italy and Spain are compared with strong exporters such as Germany, the Netherlands and Finland.

"Such a divergence is unfortunately to be expected in 2012 and also probably for the two years after," said Nowotny, who is also the head of Austria's central bank.

"After that, the effects of the structural measures adopted in the meantime should work and show up in correspondingly higher growth rates in the states," he added.

Nowotny stressed that Greece's situation was "a lot more difficult" than Spain's, Italy's or even Portugal's.

Portugal's debt and foreign trade position was better than that of Greece, Nowotny said, responding to a question about comments by the chief executive of fund giant PIMCO, who told German magazine Der Spiegel he expected Portugal to be the next euro zone country to falter.

Inflation fears are bubbling again in parts of the euro zone following the ECB's recent move to pump over a trillion euros into the banking system in a bid to calm the bloc's debt crisis.

Nowotny differentiated between inflation driven by external factors such as a spike in energy prices and price rises sparked by demand, saying the latter was currently not relevant.

"Inflation can be caused by many things. Cost effects, oil prices in particular. At the current time that (oil price) is the central problem."

Nowotny hinted the ECB would have to bring the amount of cash in the financial system back to more normal levels once the economy had stabilised.

"As soon as bank lending grows massively, central banks have to be undoubtedly very careful and if need be implement restrictive measures," Nowotny said.