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By Ilona Wissenbach
BRUSSELS, Nov 13 (Reuters) - The euro zone economy is already in a recession and European Central Bank staff may well forecast contraction in 2009 as well, ECB Governing Council member Ewald Nowotny said on Thursday.
Asked about the unexpectedly bad economic development in the second half of this year, Nowotny told reporters: "This means for the euro zone as a whole that we are in recession. The economy has developed much worse than expected."
He hoped that government stimulus packages would help to restart growth next year, but said that ECB staff projections could point to a possible contraction in 2009 as well when they are published at the start of December. "I fear that we will have at least a stagnation, if not a contraction," he said.
The ECB has already cut interest rates by 100 basis points to 3.25 percent since early October. President Jean-Claude Trichet has said a further cut could follow in December as inflation continues to subside. Nowotny repeated this view but warned that governments needed to back up the rate cuts.
"Inflation expectations are receding. That gives the ECB room for additional expansionary measures ... (but) monetary policy is not enough. Additional input from fiscal policy is needed," he said.
Official third quarter GDP figures published on Friday are expected to confirm the 15-country euro zone is in the first recession in the ECB's 10-year history.
German GDP data on Thursday set the tone, coming in far worse than expected. The economy contracted 0.5 percent in the third quarter, making this Germany's fastest two-quarter contraction in 12 years.
An ECB survey showed economic forecasters also sharply revised down their expectations of euro zone growth.
Forecasters see growth of just 0.3 percent in 2009, down from 1.3 percent earlier. The cut is the biggest downward revision to forecasts of GDP one year ahead since the survey began in 1999, the ECB said.
(Reporting by Ilona Wissenbach; Writing by Marc Jones; Editing by David Stamp)