* Nowotny sees low rates for foreseeable future
* But this guidance is not unconditional
* ECB Governing Council meets on Sept. 5
* EU's Rehn says premature to say euro zone crisis over
* Reuters poll points to another Greek bailout
By Michael Shields and Georgina Prodhan
ALPBACH, Austria, Aug 29 Major central banks'
reassurances that interest rates will stay low for some time are
giving markets "a certain security", a European Central Bank
policymaker said on Thursday.
Another European official, however, warned against
complacency and said it was too soon to say the euro zone crisis
Ewald Nowotny, a member of the ECB's Governing Council, said
the so-called forward guidance from central banks was here
because of weak economic growth and high levels of uncertainty.
"That means the central banks are giving markets a certain
security that we will have a low level of interest rates for the
foreseeable future, no rise but rather steady or lower," he told
a panel discussion at an economic conference in Austria.
"But this forward guidance is not unconditional."
The ECB has tied its 'forward guidance' on interest rates
remaining low to the inflation outlook and monetary dynamics
remaining subdued - a scenario that shows no sign of changing
any time soon.
Non-euro zone Britain's is tied to unemployment, which the
Bank of England also believes will remain stubbornly high for
Nowotny made his comments ahead of an ECB policy meeting
next Thursday. A Reuters survey of 60 economists showed the ECB
expected to keep both its main refinancing and deposit rates -
now at 0.5 percent and zero respectively - on hold until at
The ECB's 23 Governing Council members will meet against a
backdrop of improving economic data in the euro zone, though the
gradual recovery is uneven and led by Germany, where business
sentiment hit its highest level in 16 months in August.
Speaking at the same conference as Nowotny, the European
Commission's economic chief said there are signs of a gradual
economic recovery in the euro zone but it is premature to say
that the crisis is over.
"Let's be clear, especially in view of the dramatic levels
of unemployment in many parts of Europe, there is no room for
complacency ... Pronouncements that the crisis is over are
premature, to say the least," Olli Rehn told reporters.
Rehn later told Reuters that the fragile European economic
should continue into next year and become more solid.
EURO ZONE DIVIDE
Germany and France hauled the euro zone out of a 1-1/2
year-long recession in the second quarter but the recovery is
uneven, with much of the periphery still dogged by recession.
Rehn said greater fiscal credibility in euro zone countries,
action by the ECB to stabilise markets and better economic
governance had all strengthened the currency bloc's ability to
withstand political shocks.
He added that Greece was making good progress but a decision
on whether Athens may need a third bailout could not be made
until the so-called troika of its international creditors
completed an assessment in late September and early October.
However, respondents in the Reuters poll attached a 75
percent probability to one of the four countries already under a
European Union and International Monetary Fund bailout needing
yet another aid package to keep afloat financially.
Greece was the near-unanimous top pick of the economists who
thought another bailout was likely - little surprise given
Athens and Berlin have talked openly of the prospect of a third,
smaller bailout package to cover finances next year.
Economists put a median 35 percent chance a country will
ever activate the ECB's Outright Monetary Transactions (OMT), a
backstop to prevent sovereign borrowing costs spiralling out of
control through the central bank purchasing government bonds.
Six months ago, respondents were split on whether the OMTs
would be used in 2013. Recent ECB policy has focused on rates.
The bank's policymakers discussed cutting rates in July but
decided against and instead said they would keep them at record
lows for an "extended period" - the bank's first use of forward
guidance, which it reaffirmed after its Aug. 1 policy meeting.
Nowotny called the low current interest rates an historical
anomaly, but declined to comment on potential monetary steps to
exit the ECB's accommodative stance, citing the quiet period
before the central bank's rate meeting next week.
He stressed that policymakers are operating in abnormal
times and that central banks had to intervene massively in the
face of an economy on the brink of collapse.
"Central bankers have to have in the back of their heads
that we cannot repeat the errors of the 1930s," he added.