The European Commission has warned that euro zone countries face growing risks to their economic outlook due to extreme volatility in financial markets.
In its latest quarterly report, the Commission said that despite still 'robust' growth, credit conditions were tightening due to financial market turmoil.
The body said it was unclear how long it would take before the recent volatility on financial markets would calm down and what the full economic impact would be.
'In any event, credit conditions will tighten as a result of the re-pricing of risk and this will have an impact on major economic actors in the euro-area economy in 2008,' the Commission warned.
Since gripping financial markets in August, the recent turmoil has added to concerns about the impact of the euro's strength and soaring oil prices.
In September, the Commission trimmed its forecast for economic growth in the countries sharing the euro to 2.5% this year from 2.6% because risks had grown. Despite the growing risks, it said that the euro zone should remain strong at least through the rest of the year.," the Commission said.
