* UK fiscal deficit very large, must be sustainable
* Case for fiscal measures to help firms, employment
* BoE's Feb Inflation Report forecasts still "very valid" (Adds comments on inflation and recession)
By Peter Griffiths
LONDON, March 26 (Reuters) - Britain must make sure its budget deficit is sustainable in the medium term or risk damaging business confidence, Bank of England policymaker Andrew Sentance said in an interview published on Thursday.
"We do face a position where the fiscal deficit is already very large and we have got to make sure that we have a sustainable deficit over the medium term," he told the Western Mail, a Welsh newspaper. "That is an important element for macro-economic stability."
Governor Mervyn King's warning on Tuesday that the government must be cautious about any new fiscal stimulus package should not have come as a surprise, Sentance added.
Opposition politicians seized on King's comments as a sign of a rift between the government and the Bank of England.
"The governor was saying things that were consistent with his earlier comments," Sentance told the paper. "My view is that there is certainly a case for some well-targeted fiscal measures aimed at helping companies with cash-flow difficulties, sustaining employment and helping people with training."
Businesses are concerned that if the fiscal deficit gets too large they will face more taxes in the future to pay for it, he added. "So allowing a deficit to get too large is not necessarily going to help with business confidence as it is going to raise concerns over future revenue raising."
Prime Minister Gordon Brown's spokesman has denied there is a split between the government and the Bank of England.
But the timing of King's comments was awkward for the government, coming before next week's G20 summit of world leaders at which the United States, with British support, is expected to push for further stimulus measures.
Sentance stuck to the view of the economy in the February edition of the BoE's quarterly Inflation Report. This predicted that the British economy would start to recover in the second half of the year.
"That would be a profile similar to recessions we have seen in the UK before, where GDP contracts for four or five quarters and then begins to recover. But exactly how quickly the economy recovers is still hard to determine," he said.
David Blanchflower, a more dovish BoE policymaker, said on Monday that there were plausible arguments that the start of recovery could be delayed.
February's above-forecast inflation reflected weaker sterling pushing up the cost of imports, Sentance added. "It told us that the decline in the pound is having an impact on inflation in the short term," he said, echoing remarks by King. (Additional reporting by David Milliken, editing by David Stamp)