Germany is not heading for a recession even though growth slowed to zero in the second quarter of this year, the Bundesbank said yesterday.

In its monthly report, the bank said second-quarter gross domestic product (GDP) was the same as in the first quarter, and only 1 per cent up on the same period last year.

"German growth came to a halt in the spring months," said the bank. "But there should only be talk of recession when economic weakness affects many sectors and regions over the long-term." Despite weak economic data emerging almost every day from Germany, the Bundesbank was anxious to play down fears of a slowdown in the euro zone's largest economy.

"Real gross domestic product - adjusted for seasonal and calendar factors - was about as high in the second quarter as in the first quarter 2001," said the Bundesbank.

The bank said that it expected to see a recovery later this year and into next year, on the back of tax cuts and falling inflation.

Yesterday's figures from the Bundesbank were better than some analysts were expecting. The influential DIW economic institute said on Wednesday that the German economy contracted in the second quarter, and estimated that annual growth would only reach 0.7 per cent.

The Bundesbank said the European Central Bank's (ECB's)money policies were correct, even though Germany would dearly love an interest rate cut.

Analysts say the Bundesbank's report, coupled with falling inflation in several euro-zone countries, will increase the likelihood of an interest rate cut when the board of the ECB meets at the end of the month.

Last week Chancellor Mr Gerhard Schr÷der said annual growth in Germany would only reach 1.5 per cent, but the finance ministry is sticking by its official forecast of 2 per cent growth this year.