The euro zone looks unlikely to suffer a lasting economic downturn despite the risks posed by economic uncertainties in the United States, the Bundesbank said in its monthly report today.
But the bank warned that a sharp US economic downturn could put euro zone economies at risk in the short term.
"Economic growth has become a little weaker. Overall the rise in prices has slowed but uncertainties over future price trends remain strong," it added.
Turning to the US the German central bank said at the moment a "bumpy landing" for the economy could not be ruled out.
But the Bundesbank saw few signs the US economy would contract sharply or slip into a lasting phase of under-utilisation of production capacity.
Productivity gains expected in the long term, the drop in energy prices and the two recent rate cuts by the Federal Reserve "should support the economy in the medium term," it said.
On the world situation the Bundesbank said the slowdown in the fourth quarter of 2000 was largely due to the sharp rise in oil prices but was also due to the fact interest rates in the US had been high.
The bank said this "correction" also had "positive aspects" like the improvement in the euro exchange rate against the dollar and scaled-down expectations of profits.
AFP