European Union Economic and Monetary Affairs Commissioner Joaquin Almunia said he expects the economic expansion in Europe to continue even after financial markets have been roiled by defaults on U.S. sub-prime mortgages.

“Our central scenario remains one of a clear recovery,” Almunia said today at a press conference in Cernobbio, Italy. “There are good reasons that the recovery will continue.”
Concern that U.S. home loan defaults to people with poor credit histories may curb growth in the world's largest economy have prompted a slide in stock markets and pushed up borrowing costs.
The ECB this past week left its benchmark interest rate at 4 percent, shelving a planned increase as market turbulence has made banks reluctant to lend.
Almunia declined to say whether the European Commission will revise economic forecasts for the euro region. “I hope the figure for 2007 won't be significantly affected,” he said.
In May, the commission forecast growth in the 13-country euro area of 2.6 percent this year, compared with expansion of 2.7 percent in 2006, which was the strongest performance since the start of the decade.
“Our optimism hasn't disappeared,” Almunia said. Still, he acknowledged ‘downside risks’ for economic growth.
“The managing director of the International Monetary Fund, Rodrigo de Rato, said Saturday the fund would likely cut its U.S. growth forecasts for 2008 and “may also see some impact in the euro area.”
Central banks have added more than $400 billion to money markets since Aug. 9 to ease lending between banks.
“Financial-market volatility and reappraisal of risks over recent weeks have led to an increase in uncertainty,” ECB President Jean-Claude Trichet said after the rate decision Sept. 6. “Given this high level of uncertainty, it's appropriate to gather additional information before drawing conclusions” on interest rates.
(Source: Bloomberg