Fresh fears for eurozone

THE stuttering eurozone economy is in worse shape than feared as manufacturers in Germany and elsewhere in the region struggle, according to the European Central Bank.

In a downbeat assessment of the outlook for the single currency bloc, the ECB slashed its growth forecast for this year from 1.7pc to 1.1pc.

The central bank’s president Mario Draghi insisted the probability of a full-blown recession was ‘very low’, even though output in Italy is already shrinking. But he added: ‘We are in a period of continued weakness and pervasive uncertainty.’

The downgrades came just a day after the Organisation for Economic Cooperation and Development said it expects growth of just 1.3pc in France and 0.7pc in Germany this year. It said the Italian economy was likely to contract by 0.2pc and Britain could also be plunged into recession if the country leaves the EU without a deal.

With a global trade war hitting confidence at a time when the German car industry is struggling to adapt to upheaval in the car market and France is dealing with the ‘yellow vest’ protesters, the ECB moved to breathe life into the moribund eurozone economy.

The central bank said it would not raise interest rates until 2020 at the earliest – later than its previous guidance of no move before the end of the summer.

And the ECB offered banks in the eurozone a new round of cheap loans in a bid to avoid a credit crunch that would exacerbate the slowdown.