This slowdown is also expected to affect the euro area, where growth – according to the ECB staff projections made at the beginning of March – is expected to be between 1.3% and 2.1% in 2008, compared with 2.6% in 2007. The risks to growth are clearly on the downside internationally.
Aside from the fact that financial turbulence has been spreading to other markets, uncertainty remains high. Rapid economic growth in recent years has been accompanied by a build-up of global imbalances, as low US interest rates encouraged high consumer spending and lax lending standards.