European Central Bank Executive Board member Juergen Stark today called for calm as stock markets tumbled on renewed worries about a US economic downturn.
Mr Stark said he saw a slowing in the US economy as a result of the subprime crisis but that euro zone economic fundamentals were sound.
European shares sank 6 per cent yesterday, their biggest one-day slide since the September 11th, 2001 attacks, and Asian stocks followed overnight as concern about the scale of the US slowdown and fears of more write-downs in the financial sector sent investors running for cover.
"The markets are very nervous, they get new information every day and are very sensitive to it, perhaps excessively so," Mr Stark said.
"This high volatility that we see is certainly not helpful but on the other hand, one should not exaggerate events."
Asked if he saw a recession in the United States, where President George W. Bush has announced a fiscal stimulus package worth up to $150 billion, Mr Stark said much depended on private consumption.
Mr Stark said the correction in some market segments was perhaps overshooting and it would take a while for the market to find a new balance, repeating a call for more transparency on banks' exposures to subprime investments.