http://www.sxc.hu/

The chief of Germany's central bank said on Tuesday he did not expect Europe's biggest economy to slump back into recession - but warned his assessment was uncertain given the euro zone's spiralling debt crisis, calling for steps to head it off.

Speaking at the annual conference of Germany's employer's federation (BDA), Bundesbank President Jens Weidmann said: “At this point in time I don't expect a recession.” But he described the outlook as highly uncertain.

“We will only avoid a recession if the current crisis of trust does not escalate further”, Weidmann told the 1500 delegates attending the conference.

The conference was held as concern deepened that Europe's debt crisis will trigger a slowdown in the region's economy in the coming months.

Analysts have already scaled back their forecasts for growth in the region next year.

On Monday, the Bundesbank slashed its 2012 growth forecast for Germany to between 0.5 per cent and 1 per cent from the 1.8 per cent it predicted in June

In his address to the conference, BDA President Dieter Hundt also warned against undue pessimism about the global economic outlook.

“We should not always ... lapse into pessimism with every cloud on the economic horizon.

“It is always possible to talk about recession, but it is not in anybody's interest in the country to join in,” Hundt added.

Chancellor Angela Merkel, Economics Minister Philipp Roesler and European Commissioner for Economics and Financial Affairs Oli Rehn are also scheduled to address the conference.

Hundt also said that a major problem facing Germany was a labour shortage in key industries after a long-running jobs boom in the country.

“Even if growth weakens next year, I expect a continued positive development on the labour market,” the BDA chief said.

Hundt also called on the heavily indebted states at the centre of Europe's debt crisis to step up action to reduce their high deficits and debts.

He pointed to what he described as a “design fault” in the construction of Europe's monetary union and called for a new stability and growth pact based on a strict fiscal regime and a mechanism for a so-called debt brake.

He proposed automatic sanctions for those states that failed to meet the requirements set out in any new stability pact.

For his part, Weidmann called for European political leaders to lay down new directions for the eurozone debt crisis.

“When we have a clear picture of what the future (institutional) framework of monetary union is, it will help considerably to overcome the current crisis,” he said. - Sapa-dpa