Fed's Yellen often warns about lingering unemployment - ECB official

By Jonathan Spicer

NEW YORK (Reuters) - Janet Yellen, the nominee expected to run the U.S. Federal Reserve beginning next year, regularly warns at meetings of the world's central bankers that short-term unemployment can evolve into more permanent "structural" unemployment, a top European Central Bank official said on Monday.

"When central bankers meet every two months in Basel (Switzerland), the one central banker who has spoken out very strongly about this message is Mrs. Janet Yellen," said Ewald Nowotny, a member of the ECB's Governing Council.

"We are fortunate that such a central banker" is doing so, he told students at Columbia University in New York. "If you have a policy of high unemployment for too long a time then short-term unemployment may development into structural unemployment."

Last week U.S. President Barack Obama picked Yellen, the Fed's current vice chair, to succeed Fed chairman Ben Bernanke in February.

Since the financial crisis and Great Recession, Yellen has strongly defended the U.S. central bank's unprecedented efforts to spur growth and get Americans back to work. As vice chair, she often represents the Fed at meetings with ECB and other central banks in Basel

U.S. unemployment reached as high as 10 percent in 2009 but has since has fallen to 7.3 percent. In Spain and Italy, by contrast, unemployment remains at 26 percent and 12 percent, respectively.

Giving few specifics on where ECB policy might head, Nowotny said reducing high unemployment in some southern euro-zone countries is a "top priority."

"We have a growing divergence between some member countries," he said. "We have a number of countries in the south that for years now have had negative growth rates, that have high unemployment rates."

But "what one has to be aware of on the other hand is it's not something that monetary policy" can solve alone, Nowotny said. He said reforms are needed in labour markets and elsewhere to solve it.

(Reporting by Jonathan Spicer; Editing by Diane Craft)