* Central bank sees gradual, modest recovery
* Says will take many quarters to regain pre-crisis output
* Says govt needs mid-term plan to consolidate finances
(Adds details, quotes, background)
COPENHAGEN, Dec 10 (Reuters) - The Danish economy is headed for a gradual but modest upturn, though it will take many quarters to regain pre-crisis output levels, Denmark's central bank said on Thursday.
The Nationalbank said in a quarterly economic review that several indicators pointed to a stabilisation of the Danish economy in the third quarter.
"Looking forward, the emerging economic turnaround abroad can contribute to pulling up activity in Denmark through increased exports," the bank said.
"A gradual upswing with modest growth is expected," it said, but it did not provide new numerical forecasts for the economy which has been suffering from its worst downturn since the Second World War.
"It will take many quarters before last year's loss of production is recovered, so unemployment is expected to continue to rise," it added.
The bank, whose monetary policy aims to keep the crown currency stable against the euro, said the crown had been stable in recent months near its central parity though demand for crowns had increased.
The bank's mandate is to keep the crown within a narrow band to the euro around its central parity of 7.46038 and between 7.62824 and 7.29252.
The bank said that demand for the crown
The Nationalbank's main policy interest rate, the lending rate, stands at 1.25 percent after 11 cuts totalling 425 basis points since November 2008 when the global economic crisis deepened, dragging Denmark's economy with it.
The bank said that the government's 2010 budget and earlier decisions meant that fiscal policy would be expansive next year.
It said that lax policy underscored a need for the central government to come up with a medium-term plan for consolidating public finances in the years ahead.
"Such a plan should not only include a target for consolidation, but also show the means that will be used to achieve the planned improvement in fiscal policy," it said.
"That would strengthen the credibility of fiscal policy and reduce the risk of widening rate spreads to rates abroad as a consequence of the fast build-up of debt," it said.
The bank's quarterly review came a day before the government is scheduled to publish a review of its 2010 budget proposal from August. (Reporting by John Acher and Ole Mikkelsen; Editing by Kim Coghill)