Volcker says economy recovery a "long slog"

By Ros Krasny and Kristina Cooke

NASHVILLE, Tenn (Reuters) - Paul Volcker, senior economic adviser to President Barack Obama, said on Saturday that the U.S. economic recovery will be a "long slog" but that the rate of decline "is going to slow."

The United States may not be in a Great Depression but it is "in a great recession for sure," following the economy's unprecedented tumble in late 2008, Volcker said at a financial markets conference at Vanderbilt University in Nashville, Tennessee.

Volcker, a former chairman of the U.S. Federal Reserve, did not give a time-frame on his expectations for when the United States will pull out of the recession that started in December 2007.

Most economists believe the economy hit its lowest point in the fourth quarter of 2008, when gross domestic product shrank at an annual rate of 6.3 percent, or in the just-ended first quarter.

"None of us has seen a decline in economic activity at the rate of speed seen late last year," Volcker said.

For now, troubles in the financial system continue to plague the economy, and vice versa.

"The lack of a good strong recovery works against a strong financial system," he said. The financial system "is not quite comatose, but it's on life support."

Volcker said a review the Federal Reserve's role, something traditionally regarded as taboo, now seems inevitable given the fallout from the long-running financial crisis.