The president of the European Central Bank (ECB) has dismissed fears that Europe is on the verge of recession but warned that growth would be slow for months to come.

Speaking in Vienna where a meeting of the ECB's governing council left interest rates unchanged at 3.75 per cent, Mr Wim Duisenberg also indicated that the next rate cut may come later rather than sooner. "It is doubtful whether a range of rate changes coming quickly one after another by themselves would enhance rather than undermine confidence," he said.

Mr Duisenberg said it was too early to estimate the full impact of last month's attacks in the US on the euro zone. But he said the uncertainty created by the attacks would dampen economic growth.

"Last month's terrorist attacks had a negative impact on economic activity and confidence, which could delay the resumption of higher economic growth. Against this background, it was important that policy-makers in the United States, the euro area and in other countries around the world acted with measures to support confidence.

"A further positive feature is the recent fall in oil prices, which should be helpful in containing inflationary pressure and supporting the real disposable income of households, thereby sustaining consumption in many countries."

In a surprise move, the ECB cut interest rates by half of 1 per cent on September 17th, but Mr Duisenberg made clear yesterday that he did not believe further cuts were necessary in the short term.

He suggested, however, that inflation was coming down so quickly that it would fall below the ECB's target figure of 2 per cent next year. And he said the Bank would be alert to downside risks during the months ahead.

"At present, there are no major imbalances in the euro area which would require a longer-term adjustment process. On account of policies aimed at price stability, fiscal consolidation, wage moderation and structural reform, the euro area fundamentals remain very positive. Financing conditions are favourable and inflation is declining.

"The mere existence of the euro has sheltered the countries of the euro area from adverse intra-European exchange rate tensions, which had typically plagued many countries in the past when external shocks occurred," he said.

Under an informal agreement, the ECB president was expected to step down early next year but he said that the uncertainty following last month's attacks made it the wrong time to change the leadership of the ECB.