Cotis, in remarks to the International Herald Tribune, halved expected European growth rates this year estimated by the OECD in November.

In November the OECD had forecast growth of 1.9 percent in the 15 countries of the European Union this year and growth of 1.8 percent in the 12 euro-zone countries.

But Cotis also said that the threat of a world recession had receded with the outbreak of the war in Iraq.

In Washington on Tuesday the Institute of International Finance estimated that the euro-zone economy would grow by 0.9 percent this year, having forecast earlier growth of 2.0 percent.

Cotis said on Wednesday that the outbreak of war in Iraq, and seizure by coalition forces of the main Iraqi oil fields, had reduced the threat of world recession.

The fact that the oil fields were now secure had reduced oil prices, he noted.

But he argued that the governing council of the European Central Bank, meeting on Thursday, should reduce its key interest rate of 2.50 percent significantly..

A reduction of a quarter of a point was needed to counter falling consumer confidence.

Cotis said that the fall of the dollar was welcome because it was good for the world economy and for the United States.

This was because the United States had a big deficit on its balance of payments on current account, the overall measure of current flows of funds, including trade payments, into and out of a country.

The rise of the euro was not unduly serious for Europeans because European exporters could cope with a rise of the dollar since they were beginning from a favourable exchange rate position and had good margins, Cotis said.

SPACE.WIRE