Calling for Calm

"The excess of volatility of the markets is not good news," EU Economic and Monetary Affairs Commissioner Joaquin Almunia said as he arrived for a meeting of euro zone finance ministers due to focus on financial sector stability.

"I hope they will become more quiet because at least in Europe the fundamentals of our economies are sound," Almunia added. "It seems that the markets are considering the possibility of a more pronounced slowdown, even a recession in the US."

Global stock markets skidded deep into the red as US President George W. Bush's tax plans to revive the world's largest economy left investors disappointed.

"We are all concerned," said Slovenian Finance Minister Andrej Bajuk, whose country holds the rotating EU presidency. "We are following the events on a daily basis, we hope things will not be as bad as they may look."

Almunia voiced the hope that Bush's stimulus package, unveiled on Friday and consisting of $140 billion (97 billion euros) in temporary tax cuts and other measures, "can counter these risks of recession."

Worst drop since Sept. 11

Fears that the package would not avert a US recession plunged Asian and European stock markets into losses running from 3 to over 7 percent while US markets were closed Monday for the Martin Luther King holiday.

In Germany, the stock index DAX closed down more than 7 percent at 6790 points -- the worst drop since the Sept. 11, 2001 terrorist attacks.

But seeking to allay fears about the impact of US weakness on Europe, Dutch Finance Minister Wouter Bos said a US slowdown "will have an impact on the European economy but it will be moderate."

While warning against rushing to "excessive, permanent conclusions" about the outlook, Spanish Finance Minister Pedro Solbes acknowledged: "We are worried in the sense that we have to follow what's happening every hour and to try to understand what's happening."

Less dependency on US

Likewise, Almunia stressed that although the European economy depended less on US growth than in the past, a slowdown there could weigh on confidence and credit conditions in Europe.

"Our economies are not as dependent as they were in the past on the US economy but indeed through the financial or confidence channels they can be affected," he said.

The European Commission has indicated recently that it will cut its 2007 forecast for growth this year of 2.2 percent due largely to concerns about a slowing US economy, record oil prices, financial market turbulence and a strong euro.

Meanwhile, European governments have been lining up to downgrade their forecasts with Germany, Europe's biggest economy, due to estimate growth on Wednesday of only 1.7 percent after 2.5 percent in 2007, according to press reports.

Spain, which is suffering a real estate slump after years of booming growth, has cut its economic forecast to 3.1 percent from 3.3 percent previously.

French officials have acknowledged that growth this year is likely to be closer to 2.0 percent than the 2.5 percent previously expected.