In spite of some confidence returning to financial markets, Europe's outlook was “precarious”, the European Union's executive arm warned in its latest forecasts. The global banking crisis was aggravating the impact of housing market corrections and slower growth elsewhere in the world.

EU growth would slow from 1.4 per cent this year to just 0.2 per cent in 2009, while the eurozone economy would expand by 1.2 per cent this year and only 0.1 per cent in 2009. For both regions, that amounted to a dramatic downward revision of forecasts made in April, when the Commission had expected 2009 growth of 1.8 per cent in the EU and 1.5 per cent in the eurozone.

The grim outlook prompted Joaquin Almunia, EU economic affairs commissioner, to call for “co-ordinated action at the EU level to support the economy” in the way governments had acted together to shore up the banking system.