Bank of Italy sees economic recovery next year

NICOSIA, Sept 15 (Reuters) - The Bank of Italy expects the euro zone's third largest economy to emerge from a deep recession next year, but it is not yet clear whether private investments will start to pick up, the central bank's governor Ignazio Visco said on Saturday.

"We are still expecting a recovery next year. There will surely be a recovery but, if this will restart investments I do not know," Visco told reporters after a European Union finance ministers meeting in Cyprus.

"It is better to be cautious, not too feed too many positive expectations on this," he said.

Visco also said that smaller Italian lenders needed to be more careful with costs than their larger competitors.

"Smaller and medium banks must adapt (to the new system). They should be paying more attention to costs," Visco said. (Reporting By Francesca Landini)