European policymakers on Tuesday blamed the turmoil in global equity markets on US economic and fiscal policy and said Europe’s economy was resilient enough to emerge without great damage.

“The main reason [for the turbulence] is the risk of a recession in the US,” said Joaquín Almunia, the European Union’s monetary affairs commissioner. “It’s not about a global recession. It’s about a recession in the US, because big imbalances have built up over the years in the US economy – a big current account deficit, a big fiscal deficit and a lack of savings.”

He was speaking in Brussels as the US Federal Reserve announced an emergency interest rate cut of 0.75 percentage points.

Asked to comment on the Fed’s action, Tommaso PadoaSchioppa, Italy’s finance minister, said: “I don’t think the events of the last 24 hours change fundamentally the assessment. A correction is under way, a correction to important imbalances.”

Mr Almunia suggested that, if European economic growth should be below potential this year, the European Commission might relax its insistence that governments balance their bud-gets as promised by 2010.

Officials said countries with healthy public finances, such as Germany, would be better placed than others, such as Italy, to cushion the impact of economic shocks by letting automatic fiscal stabilisers come into play to offset lower revenues.

Angela Merkel, the German chancellor, on Tuesday urged small investors not to panic in the light of this week’s stock market plunge.

“There is no sign of a recession in Germany …Citizens should under no circumstances make hasty decisions,” she told a radio interview. “We are discussing whether any measures need to be taken. But remember financial markets are independent.”

Peer Steinbrück, the German finance minister, added: “It is true that the US is facing a possible recession …but we have no reason to become nervous. The economic fundamentals of Germany and Europe remain good.”

Mr Almunia contrasted imbalances in the US economy with what he described as Europe’s “solid, sound fundamentals”.

“We have a positive current account position. We have a level of savings that is the level required to finance our investments. We have improved our fiscal positions a lot. Moreover, we haven’t got subprime mortgages in our financial systems,” Mr Almunia said.

“So we are well prepared to weather this situation, even if we cannot ignore the risk of our growth rates being affected by this turmoil.”

He denied, however, that he was gloating over the US economy’s troubles. “I’m not engaged in any criticism,” he told reporters after a regular monthly meeting of the EU’s 27 finance ministers.

“These [US] imbalances are the root cause of the current turbulence. It’s not the only reason, but it’s the basic cause.”

Earlier, Jean-Claude Jun-cker, chairman of the 15-strong group of eurozone finance ministers, said Europeans could afford to be less concerned than Americans about the risks to their economy.

“We have to be concerned, but a lot less than the Americans, on whom the deficiencies against which we have warned repeatedly are taking bitter revenge,” he said. “We are much better placed in the eurozone and in Eur-ope than our US friends are.”

Nevertheless the European Commission and ECB, as well as private sector forecasters, are reducing their estimates of European economic growth this year.

Growth is expected to be 1.8 per cent or less, compared with 2.6 per cent in 2007 and a Commission forecast in November of 2.2 per cent this year.

Additional reporting by Bertrand Benoit in Berlin

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