FRANKFURT (MNI) - The world has overcome the crisis but in Europe things are moving forward at a troublingly slow rate, European Central Bank Governing Council member Ewald Nowotny said Sunday.

The head of the Austrian National Bank said on Austrian television station ORF2 that caution is warranted given the economic outlook, and that budget deficits need to be reduced as soon as practical. Greece has taken a strong step to help itself and might merit external assistance, he said.

"We are in a dilemma now, one must properly say. The business cycle is still very weak," Nowotny said. The outlook for Eurozone growth this year is "lower yet" than the Austrian forecast of +1.5%. "That is an indication of a very weak business cycle," he said. "But still, it means the time of the minus signs has past. From this perspective, certainly a bit of caution is appropriate."

Though public debt can't keep growing, "the sensible middle ground consists of beginning with the consolidation in 2011, but doing it in a gradual process," he said.

The order of magnitude on which consolidation must start taking place -- 0.5% to 0.75% of GDP -- means deficits of under 3% in line with EU rules "will take a bit long" to attain, he said. "But we must start; if we don't start, it will become yet more difficult."

A "strong and speedy budget consolidation is absolutely necessary," he said, and although the crisis required governments to run the high deficits seen throughout Europe, "it is now important to unwind this special situation ...because otherwise we would indeed run the danger of budgets that are more and more strongly determined by debt servicing."

Nowotny said that figures of his bank and the Bank for International Settlements suggest that "what we are seeing worldwide is a somewhat strange and rather worrying development."

"At the global level the economic crisis has been overcome," he explained. "In 2010 worldwide we will have growth of approximately 3.5% to 3.7% -- that is really a decent dynamic -- and in the USA about 3%. In Europe things unfortunately look distinctly slower."

He continued: "In the Eurozone for 2010 we will have growth of about 0.8%, and for Austria about 1.5%. One can say that the crisis has been overcome worldwide. For Europe, one has to say that the worst of the crisis is past, but we are not now in year one after the crisis, so to speak, but rather we are probably in year three of the crisis overall.

There is reason to hope exports will pick up further, Nowotny said, adding that in this connection, "the fact that the overvaluation of the euro has now receded somewhat is at the moment...probably the most important business cycle impulse that we have."

Nowotny declined to say anything about recent media reports over the weekend about proposals for financial aid to fiscally-troubled Greece. Although Eurozone membership offers "considerable advantages" in terms of stability and borrowing costs, members must obey the rules, he said.

"That means, when individual countries -- and this is precisely the case for Greece -- get into problems, the first obligation is for the countries themselves to repair the problems. So without a clear effort by Greece itself, all other measures are actually inconceivable," he said.

"Gratifyingly, in this case it has been demonstrated that the Greek government [and] the Greek parliament have taken really clear steps," Nowotny said. "That is naturally politically not easy to impose." He noted that recent polls showed about 70% of the Greek population backing the austerity measures. "If that is the case, then I think one can also apply other external help measures," he said.

Although the International Monetary Fund helped Hungary, countries of the Eurozone could perceive the IMF as too strongly influenced by the USA to come to the aid of one of their own, Nowotny said. This might as a corollary argue for more uniform representation of the euro area in the IMF, he suggested.

Nowotny warned against painting all troubled Eurozone countries with too broad a brush. "Ireland is a case where a very massive series of countermeasures was taken by the Irish government," he said.

"And as a result of this, Ireland today is out of the danger zone. Ireland can refinance itself on the market, as can Greece, incidentally; Greece recently issued a new bond. This also indicates that a country must deal with its structural problems itself primarily."

Expelling Greece from monetary union is "not a wise prospect, nor a serious prospect," Nowotny said. "It is naturally in Greece's interest to remain in the Eurozone, because in the event of its departure, that would mean, for example, a massive devaluation of a new Greek currency...That is completely absurd -- from the point of view of the European Union and the euro as well."

Rather than losing members it is better that members adhere to the rules, he said, "and I believe that this is exactly the direction we are now seeing" Greece taking.

In other comments, Nowotny said that while he sees "no realistic prospects for a European rating agency," the power of existing rating agencies can be limited.

"What one can also limit -- and this is also being done -- are abuses by ratings agencies, where they on the one hand have given advice for the bundling of troubled bonds and then have given those [same bonds] a rating. These conflicts of interest should be resolved," Nowotny said.

In other comments, Nowotny said that the ECB's adherence to its price stability definition is "absolutely contemporary. The task of a central bank is to be a pillar of stability and confidence. That is also the reason why it has to be independent under any circumstances."

Sacrificing consumer prices for the sake of higher employment "is certainly not the position of a central bank," he argued. "We have a very clear political mandate. That means price stability, and when price stability is ensured" then other economic goals can be pursued.

The public has "very high" confidence in the ECB and price stability, he asserted.