Eurozone finance ministers said today that the 15-nation region would avoid a recession but admitted they had underestimated the fallout from the US-led downturn on their economies.

GDP in the eurozone fell by 0.2 per cent in the second quarter, and another quarter of falling growth will tip the region into a technical recession.

But ministers ruled out a package of fiscal measures to try and boost economic activity.

Speaking after chairing a meeting of finance ministers from the eurozone region, Jean-Claude Juncker, chairman of the Eurogroup of eurozone finance ministers said: "Almost everyone was surprised by the economic contraction we’ve observed since the beginning of the summer,”

But he added: “Faced with a shock .... budgetary policies should not deviate from collective rules."

He also dismissed talk of a recession. "You should not say Europe is on the brink of recession. It isn’t true."

The finance chiefs said that, instead of economic stimulus packages, they would focus instead on curbing high inflation while making more modest efforts to address the sharp economic slowdown.

Speaking alongside Mr Juncker, Jean-Claude Trichet, the European Central Bank president, said inflation was too high but said it would be a mistake to raise wages sharply in response.

“We particularly insisted on the necessity of avoiding second round effects,” Trichet said before a meeting of finance ministers and central bankers from the European Union’s 27 member states started in the French city of Nice, which Alistair Darling, the Chancellor, and Sir John Gieve, Deputy Governor of the Bank of England, attended.

The meeting, which will continue tomorrow, comes days after the European Commission slashed its economic forecasts, predicting that Germany, Britain and Spain will plunge into recession. However, it said the eurozone would narrowly avoid a recession with GDP remaining unchanged in the third quarter.

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