The German economy will continue to grow despite problems stemming from the US sub-prime crisis, its central bank said today amid concern that the biggest euro zone economy could fall into a slump.
'Economic risks increased this summer,' the Bundesbank acknowledged in its monthly bulletin in reference to an international banking crisis that followed the collapse of the US market for high-risk mortgages.
'The underlying positive trend (of German growth) is not in question, however' because German industry remained strong and order books were full, the bank said.
Earlier, the head of the biggest private German bank, Deutsche Bank, warned that international financial market tension had grown noticeably owing to announcements by US banks that they had booked more losses linked to the sub-prime crisis.
Other financial institutions have yet to disclose their figures, Deutsche Bank chairman Josef Ackermann added.
Meanwhile, the euro's rise in value against the dollar and higher oil prices have also caused German industrialists to take a more cautious view of the future than one which prevailed earlier this year.
The German government has officially forecast economic growth of 2.4% this year and 2.0% in 2008, but many economists find the latter figure very optimistic.
