Finance Minister Peer Steinbrueck said Germany was managing the crisis' effects on its economy well.

"We in Germany are relying greatly on optimal cooperation between politicians, the German Central Bank and the banking associations and institutions to keep further consequences to a minimum," he said on Tuesday, March 18, in Potsdam.

"We are dealing with one of the largest financial crises of the past few decades," he added, pointing out that its effects could also be felt in Germany.

Steinbrueck said Germany had a better chance of withstanding the crisis than the American economy, calling it more "robust." He also praised recent American attempts to help bail out US investment bank Bear Stearns from bankruptcy.

"Greater need for joint action"

"I am pleased about the measures taken this past weekend in the US to help contain the effects of this crisis," Steinbrueck said. Competitor bank JPMorgan Chase was able to take over Bear Stearns at a rock-bottom price through a $30 billion (19 billion euro) guarantee by the US Federal Reserve Bank.

Bankruptcy at Bear Stearns could have sparked similar troubles at other financial institutions.

Deutsche Bank Chairman Josef Ackermann on Monday called on governments around the world to play a more active role in the markets to ease the liquidity crisis in the banking sector.

He said joint action between central banks, governments and the banks themselves was necessary to restore confidence in financial markets, but also said the current international turbulence made it unlikely that the markets would recover without outside assistance.

Cuts to German economic growth expected

On Monday, European stock markets had suffered sharp losses, responding to the emergency bailout of Bear Stearns and increasing fears on the fragile global financial system.

The European Central Bank on Tuesday allocated an extra 25 billion euros in liquidity during its regular weekly refinancing operation, an attempt to curb fresh anxiety on money markets.

The ECB's action follows moves by the Bank of Japan, the Reserve Bank of Australia, and the Bank of England to pump additional funds into money markets Monday. During a meeting on Tuesday, the US central bank is also expected to cut interest rates by one percent.

German economists said they expected market turmoil to have negative effects on the country's economy.

"Little by little, the turbulence in the financial markets and the strong euro are taking their toll," said Gustav Horn, director of the Macroeconomic Policy Institute.

He predicted that growth would reach just 1.3 percent, down from a previous forecast of 1.5 percent. Germany's economy booked 2.5 percent growth last year.

Threats to Germany's economy cannot be attributed to a single cause, according to Juergen Thumann, head of the Federation of German Industries.

"It is the influence of the weak dollar, rising oil prices, falling US economy and financial crisis that is making the situation difficult for companies," he told the daily Berliner Zeitung on Tuesday.