Weak banks should be allowed to fail: ECB economist

0 Comments | AFP, August, 2008

FRANKFURT (AFP) — Weaker eurozone economic activity should be temporary, but weak banks should be allowed to fail, the European Central Bank's (ECB) top economist said on Wednesday in a press interview.

"For me, a phase of weakening and a progressive convalescence is the most likely scenario," Juergen Stark told the Sueddeutsche Zeitung as German economic indicators showed Europe's biggest economy was headed for rough times.

"After the German economy began the year with a bang, that was to be expected. I nonetheless foresee more than a simple correction," Stark said.

"Domestic demand in particular is developing less strongly than anticipated. But this weakness will be temporary."

In response to a question on whether or not the ECB should try to save...