BERLIN, March 12 (Xinhua) -- German central banker Jens Weidmann said Tuesday that the eurozone financial and sovereign debt crisis still represents the most significant risk for the German economy despite recent improvements in financial markets.
"Only some of the confidence lost as a result of the crisis has been recovered so far," said Weidmann, president of the Deutsche Bundesbank, at the bank's annual balance sheet press conference.
He predicted that growth can be expected to become stronger as the year progresses.
But he added that prospective growth would depend on the absence of further shocks to confidence.
He pointed to the further heightened risks stemming from monetary policy operations in the wake of the financial and sovereign debt crisis. The past year had seen an overall increase in counterparty credit risks stemming from refinancing loans and purchasing bonds, he explained.
Despite the difficulties in many European partner countries, the German economy was still in good shape. After a contraction of 0.6 percent in the final quarter of 2012, the German economy is perking up again as the central bank said recently it expected the economy to expand in the current quarter.
As many members of the general public were worried about consumer prices, Weidmann said stirring up fears of inflation was uncalled for.
"In the short term, we in the euro area have, if anything, declining inflation risks," said Weidmann, adding that it was important to leave no doubt about European monetary policy's stability orientation in the medium term.
The German consumer price index increased by 1.5 percent in February compared to a year earlier, official data showed on Tuesday. It was the lowest since December 2010, and was mainly driven by rises of energy and food prices.