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Economy crisis wanes

LISBON, May 21 – The world economy is showing signs of recovery but the banking system that sparked the downturn is still not back to full health, the head of the OECD grouping of rich countries said on Thursday.

"You have some signs of recovery, I would not say normalisation," Angel Gurria, secretary general of the 30-nation Organisation for Economic Cooperation told reporters here ahead of a conference on the crisis.

"The problems started with the banks, two years ago already, and we still do not see the end of it. Banks are still not lending normally."

He tentatively forecast an end to the economic contraction next year. "In 2010, it will on average stabilise, and maybe in the end of the year we will see a trend towards positive growth."

Analysts have said renewed signs of health among big US banks raise hope that the credit crisis is over and US Federal Reserve minutes released Wednesday saw "tentative evidence" of an end to the US recession.

"There are signs of a return to normality, which doesn\’t mean there isn\’t any credit problem anymore," said Charles Heeter, head of the Business and Industry Advisory Committee to the OECD, which organised Thursday\’s conference.

"We still have a lot of issues in the financial markets that need to be addressed."

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