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Last Updated: Monday, 26 November 2007, 14:12 GMT
Eurozone growth 'to slow further'
Euro notes
Eurozone economic growth has been hit by the market turmoil
Eurozone economic growth is likely to slow in 2008 to 2.3% a member of the European Central Bank's rate-setting committee has warned.

Nout Wellink predicted that the central bank for the region would be forced to revise down its annual growth prospects due to recent financial market chaos.

In September, Brussels saw the combined economies of the 13-member euro bloc grow by 2.5% in 2007, less than 2006.

Since then, the crisis in US sub-prime debt has spread across the Atlantic.

"The risks are on the downward side so it is a chance that forecasts have to be revised," said Mr Wellink.

At the same time, he struck a cautious note on the outlook for inflation in the region, which jumped to a two-year high of 2.6% in October, above the ECB's 2% target.

He said he expected the upward pressure on prices to ease in the second half of 2008, but thought that it would run close to 2% in 2009.

ECB squeezed

Before the summer, the ECB had been focused on keeping a handle on inflation as the combined economies of the 13 countries that use the euro showed steady signs of recovery after years of negligible growth.

As recently as September, the expectation was that eurozone interest rates would soon rise beyond their current level of 4%.

But worries over the ability of European exporters to cope with the euro's recent surge against the US dollar and the damage to banks from bad investments linked to sub-prime home loans in the US has tied the Bank's hands for now.

Mr Wellink noted that the euro's rapid rise against the dollar - almost touching $1.50 last week - was not yet a "matter of immediate concern" for exporters.

But he repeated ECB president Jeane Claude Trichet's concern over "brutal" foreign exchange movements, which he said could be "worrying".

SEE ALSO
Eurozone heads target yuan reform
09 Oct 07 |  Business
EU cuts 2007 eurozone growth rate
11 Sep 07 |  Business
Bank warns of economic slowdown
14 Nov 07 |  Business
Eurozone growth more than halved
04 Sep 07 |  Business
US woes depress German investors
13 Nov 07 |  Business

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